Here’s a look at the second-quarter results from the first four major U.S. banks to reports earnings.
*Wells Fargo kicked off earnings reporting season for large banks on Friday by posting net income in line with expectations at $1.01 a share. That was the consensus estimate of 31 analysts in a Bloomberg poll. But it was the first time in four years that earnings per share fell from the previous quarter. And although the bank had a tax-related gain in the first quarter, analysts cited weaker mortgage demand and shrinking interest margins as additional reasons. Mortgage revenue slumped 39 percent, and net interest margin dropped to 3.15 percent. Analysts had expected it to be 3.20 percent, according to Bloomberg.
“They can’t seem to get the net interest margin decreases to level off even as interest rates have been flat over the past year,” Erik Oja, an analyst at S&P Capital IQ, told the Wall Street Journal. “They need some light at the end of the tunnel on that one.”
The bank is branching out into other types of lending, including commercial and industrial loans and credit cards, to try and offset the drop in mortgages. Gains there “sent an encouraging signal about the economic recovery,” the WSJ reported.
*Citigroup on Monday announced a $7 billion payment to resolve a probe into its mortgage lending leading up to the financial crises of 2008. Excluding that payment, the bank exceeded expectations with earnings of $1.24 a share in the last quarter. The consensus forecast of 25 analysts was $1.05 in a Bloomberg survey. The bank’s trading results were also better than expected and better than the guidance given by CFO John Gerspach in May.
“Citi produced strong investment banking results and a less-bad-than-guided trading result,” Jefferies analyst Ken Usdin told the Wall Street Journal.
Gerspach said on a conference call that “markets just picked up” late in May and in June. “As tensions eased regarding Russia and Ukraine, you saw a little bit of a relief rally,” he said, according to the WSJ.
*Goldman Sachs Group, Inc. also surprised investors and analysts Tuesday in reporting a 5 percent increase in net income to $4.10 a share. The average estimate was $3.05 per share in a Thomson Reuters survey of analysts. Investment banking fees rose and the decline in fixed-income revenue was less than expected. Revenue was 6 percent higher at $9.13 billion.
“We’ve got a strong beat here, primarily revenue-driven, and Goldman is a little more resilient than expected,” Devin Ryan, an analyst at JMP Group Inc., told Bloomberg News.
*JPMorgan Chase & Co., the largest U.S. bank, reported a smaller-than-expected decline of 7.9 percent in net income, to $1.46 a share. The average estimate was $1.31 in a Bloomberg survey of 29 analysts. Revenue was 2.3 percent lower as a slump in trading revenue and mortgage lending weighed on earnings. Fixed-income trading revenue fell 15 percent, and mortgage loan originations plummeted 66 percent. On the bright side, total deposits rose 7 percent, business loan originations jumped 46 percent, and advisory fees gained 31 percent.
“It just felt like a good quarter, good leading indicators, good economic background, good enough returns and a cheap stock,” Glenn Schorr, an analyst at ISI Group, told the Financial Times.