The news: After a tumultuous few months in the US banking sector, the results are in for Wall Street lenders’ first quarters.
Trendspotting: As expected, banks benefited from higher interest rates, which they’ve used to bulk up earnings rather than passing them on to savers. Big banks have generally also bolstered their deposits, as they capitalize on the greater security they can offer customers compared to regional lenders. But it wasn’t all smooth sailing. Slumping deals contributed to a miserable three months for investment banking.
JPMorgan
In broadly upbeat results, JPMorgan was the prime example of a large bank that benefited from the security its size can offer customers at a time of growing uncertainty, particularly those with assets at smaller banks.
- It reported net income of $12.6 billion, jumping 52% year over year (YoY).
- JPMorgan generated record revenue of $38.3 billion, up 25% YoY and topping forecasts of $36.2 billion.
- The bank also added $37 billion in new deposits, beating analyst predictions of a decline.
-
Investment banking remained in poor health, with a 24% drop in revenue to $1.6 billion, below market estimates.
Bank of America
BofA also posted strong Q1 results, benefiting from higher interest rates to beat expectations for revenue and earnings.
-
Net income rose 15% YoY to $8.2 billion while revenue increased 13% YoY to $26.3 billion, driven by higher rates along with loan growth.
-
Net interest income jumped 25% YoY to $14.4 billion.
- Despite CEO Brian Moynihan saying “every business segment performed well,” BofA plans to cut up to 4,000 jobs before the end of June.
-
Investment banking fees dropped 20% YoY to $1.2 billion, reflecting “weaker industry-wide activity.”
Citigroup
Citi attributed growth to strong consumer spending and higher interest rates, but consumer deposits were stagnant compared to some of its rivals.
-
Revenue climbed 12% YoY to $21.4 billion.
-
Net income widened 7% YoY to $4.6 billion despite higher expenses and increased credit costs.
-
US personal banking revenue rose 18% YoY on the back of higher interest rates.
- Citigroup’s end-of-quarter deposits were about $1.3 trillion, virtually unchanged from a year earlier and down 3% quarter over quarter (QoQ).
- In line with other banks, its investment banking revenues slumped 25% YoY to $774 million.
Wells Fargo
The bank posted buoyant results but is holding more than $1 billion for credit losses.
- Wells Fargo reported strong top- and bottom-line growth, with revenue up 17% YoY to $20.73 billion and net income jumping 32% YoY to $4.99 billion.
- The bank reported a 45% YoY leap in net interest income to $13.34 billion, ahead of expectations.
- But Wells Fargo set aside $1.2 billion for credit losses, 26% higher QoQ, tied to commercial real estate, credit card, and auto loans.
-
Consumer deposits were down 2% QoQ and 7% lower YoY at $1.36 billion.
Goldman Sachs
Goldman’s profits shrank as its disappointing consumer banking endeavors and weak trading and dealmaking hurt growth.
-
Revenue was $12.22 billion, down 5% YoY and below estimates as the bank struggled compared to its more diversified Wall Street rivals.
-
Profits nosedived 18% to $3.23 billion, including a loss of about $470 million on the partial sale of Marcus’ loans portfolio.
- Investment banking fees were $1.58 billion, 26% lower YoY.
-
Net interest income was $1.78 billion, down 14% YoY. It’s expected to drop further this year.
Morgan Stanley
Much Like Goldman, Morgan Stanley struggled amid weaker revenue from its investment bank and climbing costs.
-
Profits narrowed 19% YoY to $2.98 billion on revenue that slipped 2% YoY to $14.52 billion. Expenses inched up 4% to $10.52 billion.
-
Wealth management was a bright spot, attracting net new assets of $110 billion during the quarter.
- Morgan Stanley’s investment banking revenue slumped 24% to $1.2 billion, marginally beating analyst forecasts.
- The bank also set aside $234 million for credit loss provisions, up sharply from $87 million last quarter.
Continue reading: Check out how card volumes at US banks stacked up in our Payments Innovation Briefing coverage of earnings season.
This article originally appeared in Insider Intelligence’s Banking Innovation Briefing—a daily recap of top stories reshaping the banking industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.
