It's Friday, but Wall Street didn't seem to think that the end of the week was worth celebrating. Stock index futures were generally lower early Friday morning, following through on Thursday's declines. Investors are trying to figure out what the next step will be for the Federal Reserve in managing monetary policy and inflation. Meanwhile, market participants are also anxiously looking at the bond market to see if it will stabilize after having seen a huge run-up in interest rates over the past two years.
Earnings season is often a good distraction from macroeconomic factors, and several big banks kicked off earnings season by providing their third-quarter results. Overall, the news for JPMorgan Chase (JPM 0.06%), Wells Fargo (WFC -0.03%), and Citigroup (C 1.41%) was positive, although each bank had its own nuances. Read on to learn about the details.
JPMorgan stays strong
Shares of JPMorgan Chase were up about 1% in premarket trading. The Wall Street bank has done well in navigating the choppiness in the industry this year, taking advantage of opportunities for growth while shoring up its own financial condition.
JPMorgan reported revenue of $39.87 billion, up 22% from year-ago levels. Noninterest expense grew at a slower 13% pace, and that helped net income soar 35% year over year to $13.15 billion. The gain in earnings per share was even higher, as a drop in share count lifted the per-share figure by 39% to $4.33.
Higher interest rates were a big driver of JPMorgan's results, as higher rates helped the bank, particularly in Chase's card services division. In addition, JPMorgan's acquisition of First Republic during the spring helped bolster growth, adding 6 percentage points to revenue gains and 11 percentage points on bottom-line growth.
JPMorgan CEO Jamie Dimon remained cautious about the future, noting that consumers have stayed strong but are spending down their cash reserves. Even as Dimon prepares for the worst, JPMorgan has done a good job in keeping its risk to manageable levels and capitalizing on its most lucrative markets.
Bigger share-price moves for Wells, Citi
Other big banks saw their shares move more sharply higher. Shares of both Wells Fargo and Citigroup were up nearly 3% in premarket trading early Friday.
For Wells, the third quarter showed interesting trends. Total revenue was up much less sharply than at JPMorgan, rising just 6.6% year over year to $20.86 billion. However, a big drop in noninterest expense helped give Wells a big earnings boost. Net income jumped more than 60% to $5.77 billion, working out to $1.48 per share.
Wells Fargo CEO Charlie Scharf pointed to the bank's expense management as a key pillar of its broader strategy, particularly as the economy slows. Wells also moved forward with some restructuring moves, selling off some private equity investments but building new relationships to get more access to the alternative asset investing space. Scharf warned of potential higher capital reserve requirements, but for now, shareholders appreciate the big 17% increase in Wells Fargo's dividend recently.
Meanwhile, Citi's results were more muted. Revenue climbed 9% year over year to $20.1 billion, but net income of $3.5 billion and earnings of $1.63 per share were flat compared to year-ago levels.
Citigroup CEO Jane Fraser pointed to strength in key areas like its markets division, which benefited from favorable activity in its fixed income unit. The services segment is the fastest-growing part of Citi's business, and the rise in bond issuance and emergent initial public offering (IPO) trends also helped boost investment banking results. Fraser also noted the caution that consumers are now starting to have about spending, although it didn't hurt the personal banking segment's numbers -- even as competition starts to heat up.
Overall, big bank earnings gave Wall Street the favorable start to the third-quarter reporting season that it wanted. Now, it'll be up to other companies to keep up the positive momentum if the stock market is to end the year on a positive note.
