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JPMorgan Chase and Citigroup beat Wall Street's 3Q earnings forecasts while Wells Fargo falls short

JPMorgan's consumer and community banking division drove profits higher in the quarter while Citi's profits were boosted by corporate tax changes
Jamie Dimon
Wells Fargo is still battling to restore its credibility in the wake of its fake-accounts opening scandal

JPMorgan Chase (NYSE:JPM), the first big US bank to report, zipped past Wall Street’s forecasts for the third quarter as its booming retail banking business made up for a slowdown in bond trading.

America's biggest bank by assets got the quarterly earnings season off to a strong start by reporting that its earnings came in at $8.38 billion, or $2.34 per share, which represents a 24% rise from the $6.73 billion it earned in the year-ago quarter.

Analysts had expected the bank to earn $2.25 per share.

Its revenue, meanwhile, amounted to $27.8 billion, which was up from the $26.452 billion reported in the year-ago quarter, and more than the $27.44bn expected by analysts.

“JPMorgan Chase delivered strong results this quarter with top-line growth in each of our businesses,” chief executive Jamie Dimon said. “The US and the global economy continue to show strength, despite increasing economic and geopolitical uncertainties, which at some point in the future may have negative effects on the economy.”

The weak spot for the bank was its fixed-income revenue, which came in at $2.84 billion, dropping 10% from the year-ago quarter and falling short of the $2.96 billion expected by analysts.

Elsewhere, the bank’s consumer and community banking division excelled, posting a 10% jump in year-on-year revenue to $13.29 billion and seeing its net income climb 60% to $4.086bn, helped by recent changes to the US tax code.

Investors cheered the results, sending JPMorgan Chase shares up 1.2% in Friday’s morning trading session to $109.27.

Citigroup posts mixed results, but shares rise

Unlike the House of Morgan, Citigroup (NYSE:C) posted a mixed showing in the third quarter as its earnings beat the Street’s estimates while its revenue fell short.

Citigroup reported profits of $4.6 billion, or $1.73 per share, which exceeded the consensus estimate of $1.69 per share. Its revenue, meanwhile, came in at $18.39 billion, which just missed the $18.5 billion predicted by analysts.

Like JP Morgan Chase, Citi was helped by cutting costs and tax code changes, as its tax rate in the quarter came to 24% compared to 31% in the year-ago quarter.

Revenue at the bank’s global consumer bank jumped 2% to $8.65bn from the year-ago quarter, helped by a surge in business in Mexico. Revenues from Latin America drove profits higher, climbing 10% to $2.725 billion year-on-year while revenues from North America, the bank’s biggest profit center, fell 5% to $8.46 billion.

Net interest margin, a key measure of bank profitability, came in at 22.7 percent, which met Wall Street’s predictions.

“Our results this quarter showed solid year-over-year revenue growth across many of our businesses, including Fixed Income, Treasury and Trade Solutions, Securities Services, the Private Bank and our consumer franchise in Mexico,” Citi CEO Michael Corbat said in a statement.

Citigroup shares jumped 3.3% to $70.62 in Friday’s morning trading session.

Hit by lending slowdown, Wells Fargo misses mark in 3Q

Wells Fargo (NYSE:WFC) reported that its quarterly profit missed the mark set by Wall Street, hampered by a slowdown in lending growth, while its revenue came in ahead of estimates.

While the pick-up in interest rates provides a boost to banks' profitability, it is impeding the taking out of loans as borrowers face higher mortgage rates.

In the third quarter, the number of loans at the San Francisco bank dropped 1% to $942.3 billion.

Its earnings, meanwhile, came in at $6.01 billion, or $1.13 per share, which was 32% higher than the net income of $4.54 billion posted in the year-ago quarter.  The results fell short of the consensus estimate of $1.20 per share.

Its revenue of $21.9 billion just exceeded the Street’s forecast of $21.8 billion and was essentially flat from the year-ago quarter, with the only pick-up in sales coming from its community banking division.

Wells Fargo is battling to restore its credibility with customers following its fake-accounts opening scandal, which has put a drag on its performance compared to other banks.

Wells Fargo shares traded 2% higher at $52.46 on Friday.

PNC beats Street's forecasts, but fails to please investors

PNC Financial Services Group (NYSE:PNC) also came in on the winning side of the Street’s earnings forecasts, but saw its expenses jump and the average size of its loans flatten.

The US regional lender posted earnings of $1.4 billion, or $2.82 per share, up from $1.126 billion, or $2.16 in the year-ago quarter. Analysts had expected earnings of $2.72 per share. Its revenue, meanwhile, came in nearly 6%  higher at $4.36 billion

Elsewhere, its average loans came in at $223.3 billion, up about 2% from the year-ago quarter, but flat from the previous period.

Commercial loans in the quarter also just inched up to $149.9 billion from $146.9 billion, as borrowers balked at loan terms in the face of higher rates.

Investors came away disappointed as PNC shares slipped 3.4% to $127.08 in Friday’s morning trading session.

Contact Ellen Kelleher at [email protected]

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