JPMorgan Chase’s Q4 report beat analysts’ forecasts, while Citigroup and Wells Fargo reported mixed results. All three banks’ shares fell on Friday.
The largest US banks JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC) reported their results for the fourth quarter of 2020.
Shares of all three banks declined on Friday amid a general market decline following a pessimistic government report on U.S. retail sales, high unemployment and COVID-19 incidence.
At the same time, over the last quarter, JPMorgan, Wells Fargo and Citigroup rose 36.3%, 39.6% and 47.3%, respectively.
Market analysts expect overall earnings for S&P 500 companies to decline 9.5% in the last quarter of 2020 (compared to last year), but rise 16.4% in the first quarter of 2021.
Low interest rates and current macroeconomic conditions remain negative factors for banks, while the Fed’s lifting of restrictions on share repurchases and the release by banks of part of the reserve funds that were previously held to cover loan losses is positive.
The management of the three banks said that the improved economic outlook allowed them to free up nearly $ 5 billion in reserves. Loan loss provisions fell $ 2.5 billion from JPMorgan Chase, $ 1.5 billion from Citigroup and $ 758 million from Wells Fargo. But the three banks still have about $ 72 billion in total reserves, nearly double the amount the three banks held before the crisis.
The executives of JPMorgan, Wells Fargo and Citigroup as a whole have announced their more optimistic forecasts for the US economy for 2021. Analysts also noted the active IPO market, which gives banks the opportunity to earn good money as underwriters.
Last week Joe Biden called on Congress for $ 1.9 trillion. to help the economy and defeat the pandemic. Economists believe that this funding will be enough for the US economy to recover from the COVID-19 recession by the third quarter of this year.
JPMorgan beat revenue and earnings forecasts
Shares of JPMorgan reacted on Friday with the smallest fall of 1.8% (among the three banks), as the bank’s quarterly report beat the market analyst average.
Strong divisions such as investment, wealth management, and trading have enabled JPMorgan to offset losses in its consumer banking division.
JPMorgan’s earnings per share for the fourth quarter rose 19% year-on-year to $ 3.07, $ 0.45 better than analysts’ estimates of $ 2.62.
Revenue rose 3% to $ 29.2 billion, also beating analysts’ forecasts of $ 28.7 billion. JPMorgan’s quarterly revenue and earnings statistics for the last 2 years are available here.
While revenues from consumer banking fell 8% to $ 12.73 billion, revenues from fixed income trading, stock trading, investment banking and wealth management increased by 15%, 32%, 37% and 10%, respectively.
Citigroup Shares Fall 7% Amid Report
Citigroup reported lower fourth-quarter earnings than Wall Street expected, citing a 14% drop in revenue for its core consumer division
Global Consumer Banking. Citi executives said the fall was due to low interest rates and declining card transaction volumes.
Citigroup’s earnings per share for the fourth quarter fell 3% to $ 2.08, but was $ 0.74 more than analysts’ estimates of $ 1.34.
Revenue fell 10% to $ 16.5 billion and was below the $ 16.71 billion analyst forecast. Citigroup’s quarterly revenue and earnings statistics for the last 2 years are available here.
Revenues from consumer banking fell by as much as 14% to $ 7.3 billion, investment banking fell 5% to $ 1.3 billion.
Growth was demonstrated in the segments of trading with fixed income and trading in shares: by 7% to $ 3.1 billion, up 57% to $ 810 million, respectively
Citigroup CEO Michael Korbat said: “We continue to be very well capitalized and have high liquidity to serve our customers.”
Wells Fargo loses investor confidence
Wells Fargo shares reacted with the largest 7.8% decline of the three, as the bank’s earnings declines for several quarters in a row have raised concerns among investors.
In recent quarters, Warren Buffett’s investment firm Berkshire Hathaway (BRKB) has more than halved its stake in the company to 127.38 million shares, or 3.3% of Wells Fargo. 34 hedge funds cut their total holdings in Wells Fargo by 40.8 million shares in the last quarter.
Analysts point to a weaker investment arm of Wells Fargo, which is causing the bank “to lose market share in favor of competitors.”
Wells Fargo’s fourth-quarter earnings per share rose 4% to $ 0.64, slightly more than analysts’ estimates of $ 0.60.
At the same time, quarterly revenue fell 10% to $ 17.93 billion from an analytical estimate of $ 18.13 billion. Wells Fargo’s quarterly revenue and earnings statistics for the last 2 years are available here.
Wells Fargo’s consumer banking and lending business revenue dropped 5% to $ 8.61 billion, while commercial banking revenues fell 18% to $ 2.9 billion and corporate and investment banking lost 7%. bringing in $ 3.11 billion. Fixed income trading income was unchanged from the year-ago quarter.
On Friday, shares of two other major US banks, Bank of America (BAC) and Goldman Sachs (GS), which are reporting on Tuesday, fell 2.9% and 2.2%, respectively.