U.S. fourth quarter earnings season kicked off last week with major retail banks reporting figures and providing an updated picture on how the economy is tracking through the inflationary rate hiking central bank environment.
So far, JP Morgan, Bank of America, Bank of New York Mellon, Wells Fargo and Citibank have already.
Key themes from the cohort have included growth in Net Interest Income which has been boosted by the FED’s rate hiking cycle, growth in balance sheet reserves to offset the upcoming recession being offset by declining customer deposits.
For the investment banking divisions, trading revenues are coming in above market expectations while Investment Banking revenues remain weak on low levels of deal flow in capital markets.
When taking a closer look into each of the banks results:
JP Morgan (US:JPM) generated $34.5 billion in reported revenue over the fourth quarter with the result as expected by analysts which polled $34.4 billion in forecasts. The group’s average loan balance rose +6% while deposits on the balance sheet declined by -4%. Net interest income grew by $6.6 billion to $20.3 billion while other income declined $1.4 billion to $15.3 billion of revenue.
JPM’s investment banking revenue declined -52% to $700 million and the assets under management balance retreated -11% to $2.8 trillion, however total market revenue still rose 7% to $5.7 billion as trading volumes remained strong.
At the bottom line JP Morgan’s net income rose 13% to $11 billion, equating to $3.57 of earnings per share for holders. The profit figure came in 15.5% ahead of consensus forecasts expecting around $3.09 per share.
JPM rose +2.52% on news of the result.
Bank Of America’s (US:BAC) fourth quarter group revenues grew 11% over the year to $24.5 billion and beat consensus forecasts of $24.2 billion. Net interest income grew 29% over the year to $14.7 billion but fell short of forecasts of $14.9 billion. Non interest income declined -8% to $9.9 billion.
BAC’s average deposits declined by -5% to $1.9 trillion but remained flat when compared to the prior quarter. Despite industry headwinds being faced by the group, Bank of America was able to grow bottom line profit marginally to $7.1 billion and lifted EPS over the year to 85 cents. The result outpaced street forecasts of around 78 cents.
Fintel’s sentiment analysis indicates that BAC continues to experience above average levels of fund buying activity, explained by a quant Fund Sentiment score of 62.64.
BAC traded 2.20% higher on Friday following the release.
Wells Fargo (US:WFC) reported a -6% decline in revenue to $19.7 billion and missed consensus analyst forecasts expecting a figure of $20 billion. Net interest income grew by $4.2 billion over the year to $13.4 billion but was offset by a significant -$5.4 billion decline in non interest income.
Wells Fargo’s bottom line profits halved over the year to $2.7 billion or 67 cents per share as the bank was hit with a $3.7 billion fine from the Consumer Financial Protection Bureau. Even with the weak result, the bank still outperformed bearish consensus EPS forecasts of 60 cents.
Although Wells Fargo has experienced several difficulties over the past few years, Fintel’s sentiment analysis indicates funds are still buying the stock, explained by a quant Fund Sentiment score of 68.06.
The result pushed WFC 3.28% higher in trading on Friday.
Citigroup (US:C) on Friday reported fourth quarter sales growth of 6% to $18 billion at the mid-point of analyst forecasts. Net interest income grew by 23% over the year to $13.3 billion and offset a -24% decline in non interest income to $4.7 billion.
The group’s net income declined -21% over the year to $2.5 billion or $1.16 per share compared to forecasts of $1.14. Citigroup’s management highlighted that the results included a $192 million impact relating to divestments.
Fintel’s sentiment analysis on Citigroup remains bearish from institutions and hedge funds, explained by a weak quant Fund Sentiment score of 33.07.
C closed 1.69% higher on Friday as investors digested the print.
From the mid-cap side, Bank Of New York Mellon (US:BK) reported a decline in total revenue by -2% to $3.9 billion, missing consensus estimates of $4.2 billion. On an adjusted basis, management told investors that revenue increased 9% to $4.4 billion.
BNY’s net interest revenue grew by 56% to $1.1 billion while fee and other revenues declined by -14% to $2.9 billion. The bank’s profits for shareholders fell sharply by -38% to $509 million or 62 cents per share. On an adjusted basis the bank generated EPS of $1.30. These figures compare to a consensus forecast of $1.01 polled by analysts.
Fintel’s sentiment analysis on BNY suggests the company is experiencing average levels of insider buying activity measured by a 51.13 Insider Sentiment quant score while institutions continue to actively accumulate shares, explained by an above average Fund Sentiment score of 62.98.
BK followed the sector higher on Friday, rising 1.81%.
This article originally appeared on Fintel.
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