Earnings Report Quick Recap: Banks Beat Q2 Consensus Estimates, Market Opens Higher

Our latest Market Insights article highlighted the banks that were slated to report today which would officially kick off the Q2 earnings season. All four banks have beat consensus estimates on Q2 EPS and Revenues. The below table provides a quick update on what banks have announced before the open:

Further detail and guidance provided below:

JP Morgan (JPM)

Management Comments:

• Chairman and CEO Jamie Dimon: “The U.S. economy continues to be resilient. Consumer balance sheets remain healthy, and consumers are spending, albeit a little more slowly. Labor markets have softened somewhat, but job growth remains strong. That being said, there are still salient risks in the immediate view-many of which I have written about over the past year. Consumers are slowly using up their cash buffers, core inflation has been stubbornly high (increasing the risk that interest rates go higher, and stay higher for longer), quantitative tightening of this scale has never occurred, fiscal deficits are large, and the war in Ukraine continues, which in addition to the huge humanitarian crisis for Ukrainians, has large potential effects on geopolitics and the global economy. While we cannot predict with any certainty how these factors will play out, we are currently managing the Firm to reliably meet the needs of our customers and clients in all environments.”

Q2 Earnings and Revenue:

• Q2 EPS: $4.37 ex-items vs FactSet $3.97
• Revenue: $41.31B vs FactSet $38.66B

Guidance FY2023:

• JPMorgan Chase sees total 2023 NII $87B vs prior guidance ~$84B
  • FactSet 2023 NII consensus $83.3B
• Reaffirms 2023 adjusted expense outlook of ~$84.5B
• Reaffirms 2023 Card Services NCO rate of ~2.60%

Wells Fargo (WFC)

Management Comments:

• “We reported solid results in Q2, with net income of $4.9B and revenue of $20.5B. Our strong net interest income continued to benefit from higher interest rates, and we remained focused on controlling expenses. As expected, net loan charge-offs increased from Q1. Consumer charge-offs continued to deteriorate modestly. Commercial charge-offs increased driven by a small number of borrowers in Commercial Banking, with little signs of systemic weakness across the portfolio, and higher losses in commercial real estate, primarily in the office portfolio. We had a $949M increase in the allowance for credit losses, primarily for commercial real estate office loans, as well as for higher credit card loan balances. While we haven’t seen significant losses in our office portfolio to-date, we are reserving for the weakness that we expect to play out in that market over time. The recent Federal Reserve stress test affirmed that Wells Fargo remains in a strong capital position, reflecting the value of our franchise and the benefits of our operating model. We repurchased $4B of common stock in Q2 while maintaining our strong capital position. Our CET1 ratio was 10.7%, 1.5 percentage points above our current regulatory minimum plus buffers, and 1.8 percentage points above our expected new regulatory minimum plus buffers starting in Q4 of this year. While we expect to repurchase more common stock this year, we believe continuing to maintain significant excess capital is prudent until there is more specificity on the new bank capital requirements,” 

Q2 Earnings and Revenue:

• Q2 EPS: $1.25 vs FactSet $1.16
• Revenue: $20.53B vs FactSet $20.11B

Guidance FY2023:

• Wells Fargo sees FY23 net interest income +14% y/y vs prior guidance of +10% y/y
  • +14% y/y growth implies 2023 NII of ~$51.5B vs current FactSet consensus of $50.7B
• 2023 noninterest expense excluding operating losses is expected to be ~$51.0B vs prior guidance ~$50.2B
  • Includes higher severance expense driven by lower than expected attrition
  • As previously disclosed, we have outstanding litigation regulatory and customer remediation matters that could impact operating losses

State Street Corp (STT)

Management Comments: 

• “Our second-quarter results reflect the strength of our business model year-over-year as strong net interest income growth, a significant expansion in front office solutions and higher securities finance revenue contributed to improved EPS and ROE. Quarter-over-quarter we saw good fee momentum across a number of our businesses, helped by accelerated onboarding of our to-be-installed AUC/A pipeline, while we continued to invest and serve our clients. Our strong balance sheet and capital generation enabled us to return approximately $1.3B to shareholders through common share repurchases and dividends in Q2. We are also pleased by the results from this year’s supervisory stress test, which once again confirm the resiliency and strength of our franchise. For the third consecutive year, we announced our plan to increase our per share common stock dividend by 10%, and we intend to continue to execute on our common share repurchase authorization of up to $4.5B during 2023, subject to market conditions and other factors. 

Q2 Earnings and Revenue:

• Q2 EPS $2.17 vs FactSet $2.10
• Revenue: $3.11B vs FactSet $3.14B

Citigroup (C)

Q2 Earning and Revenue:

• Q2 EPS: $1.33 vs FactSet $1.31
• Revenue: $19.44B vs FactSet $19.34B

Guidance FY2023:

• Citigroup reaffirms 2023 revenues of $78-79B, excluding divestiture-related impacts
  NII ex-markets $46B+ vs prior guidance $45B
• Reaffirms Expenses of ~$54B (ex-2023 divestiture-related impacts) vs 2022 reported of $51.3B