JPMorgan Chase & Co. (ticker: JPM), Citigroup Inc. (C) and Wells Fargo & Co (WFC) kicked off big-bank earnings season on Friday morning by delivering a mixed bag of numbers. Overall, the banks reported better-than-expected earnings and revenue in the second quarter, but their stocks all initially traded lower as investors focused on soft trading revenue numbers and disappointing net interest income.
At first glance, JPMorgan appeared to deliver a blowout quarter, handily topping consensus analyst estimates. The bank giant reported earnings per share of $1.82 on revenue of $26.41 billion compared to consensus estimates of $1.58 and $24.96, respectively. However, shares dropped 2.2 percent as investors dug into the details of the quarter. JPMorgan’s quarterly numbers were padded by a one-time $406 million legal settlement, and the firm actually lowered its net interest income forecast for 2017 by $500 million.
“JPMorgan has put up remarkably strong loan growth and it’s slowed down a bit this quarter, but we also saw the net interest margin, which is very critical for all the banks, that came in lower than expected due to higher funding costs,” RBC Capital Markets analyst Gerard Cassidy says.
Citigroup delivered similar earnings and revenue beats on Friday. The company reported EPS of $1.28 on revenue of $17.9 billion, topping Wall Street expectations of $1.21 and $17.37 billion. However, equity market trading revenue declined 11 percent on the quarter, and fixed income markets revenue declined 6 percent from a year ago. Citigroup’s stock initially dropped 1.9 percent.
Wells Fargo reported the weakest overall numbers of the group. EPS of $1.07 topped Wall Street forecasts of $1.01. But Wells Fargo’s $22.17 billion in revenue came up just short of consensus estimates of $22.47 billion. Trading revenue weighed on Wells Fargo’s numbers as well. Net gains from trading were down 28 percent on the quarter. WFC stockinitially declined 2.3 percent.
Shares of all three big banks have surged since Election Day 2016 on hopes that financial deregulation, tax cuts and higher interest rates would provide a tailwind for bank earnings. However, tax reform has been…
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