Citigroup Inc (NYSE: C) and JPMorgan Chase & Co. (JPM) kicked off big bank earnings season with a mixed bag of results on Thursday morning. Overall, both banks reported earnings and revenue beats for the third quarter, but investors were most concerned about the banks’ trading revenues.
At first glance, JPMorgan appears to have delivered a blowout quarter, easily topping consensus analyst estimates. The bank reported earnings per share of $1.76 on revenue of $26.2 billion. Analysts had been expecting EPS of $1.65 on revenue of $25.2 billion. However, JPMorgan stock barely moved on Thursday morning as investors took a deeper look into the bank’s numbers.
Trading revenue declined 21 percent from a year ago, including a 27 percent drop in fixed-income trading. Equities trading also declined by 4 percent, as global markets continue to demonstrate historically low volatility. In September, CEO Jamie Dimon warned investors to anticipate a 20 percent decline in trading revenue.
JPMorgan’s trading weakness was offset by strength in consumer banking. Core loans increased by 7 percent to $837.5 billion, and net interest income increased by $1.2 billion to $13.1 billion.
Citigroup also reported EPS of $1.42 on revenue of $18.1 billion. Like JPMorgan, Citigroup beat analyst estimates of $1.32 and $17.8 billion, respectively.
Citigroup was not immune to trading pressures, reporting a 16 percent decline in fixed-income trading revenue. However, Citigroup was able to generate a 16 percent increase in equities trading revenue even in the calm markets.
Global consumer banking revenue increased by 3 percent, and North American retail banking revenue, excluding mortgages, was up 12 percent. Deposits climbed 3 percent to $964 billion, and end-of-period loans ticked higher by 2 percent to $653 billion.
Citigroup’s stock initially traded higher by 0.4 percent.
Investors generally see a positive environment for big banks headed into 2018.
“It’s expected that a rise in interest rates would positively affect bank profits by enabling banks to increase the interest margin between loan and deposit rates,” says Evgenia Konovalova, a stock market analyst at FxPro.
Just this week, San Francisco Federal Reserve president John Williams said he expects one more interest rate hike in 2017.
According to the CME FedWatch Tool, the bond market is currently pricing…
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