Wells Fargo, Citi and JPMorgan Report Financial Results: Here’s What You Need to Know

Reality is starting to settle in for the three largest U.S. banks, at least according to their second-quarter results. While some of the truths reflected in earnings reports in JPMorgan Chase, Citigroupand Wells Fargo have given banks — and their investors — reason to calm down, but potential storm clouds still loom in the distance.

As expectedAll three banks that reported earnings before the close of trading Friday reported increases in profits and revenue compared with the previous quarter and a year ago. Those results also met (or beat) Wall Street estimates.

However, on Friday morning their shares fell. Net interest income (NII), a key metric that shows how much banks earn on loanscame under the spotlight again this quarter as Wells Fargo and JPMorgan both posted negative results for this metric.

Meanwhile, at Citi, lower costs and higher-than-expected revenue and profit gave signs that Chief Executive Jane Fraser’s corporate reform plan may already be bearing fruit.

Here are the key takeaways from Friday’s financial results.

The fruits of Jane Fraser’s Citi transformation

Citi’s second-quarter results gave investors a look at the early results Fraser’s simplification plans, which were completed in early 2024. The process led to thousands of job cuts and billions in additional spending, sending shivers down the spine of investors over the past two quarters.

But the bank’s operating expenses fell 2% year over year in the three months ended June 30, helped by simplification savings, Citi said. Costs totaled $13.4 billion in the quarter.

“Our results demonstrate the progress we are making in executing our strategy and realizing the benefits of our differentiated business model,” Fraser said in a statement accompanying the report, pointing to “tremendous progress in simplification — both strategically and organizationally.”

Citi reported revenue of $20.1 billion in the second quarter, reported Friday, up 4% from a year ago and matching Wall Street estimates, according to data compiled by FactSet. The New York-based bank reported $3.2 billion in net income, or $1.52 per share, well above the $1.39 per share expected by analysts.

While the quarterly results reflected the strength of Citi’s services business, Warren Kornfeld, senior vice president of Moody’s Ratings Financial Institutions Group, said Citi continues to face challenges in growing its market share and reducing expenses in other areas of its business.

Shares of the third-largest U.S. bank rose 2% in premarket trading Friday but were down more than 3% in morning trading. Citi shares are up more than 20% this year.

Fraser said on a call with analysts that Citi continues to address risk and compliance issues as part of its ongoing transformation. The bank has been affected $136 million fine Federal regulators on Wednesday said “inadequate progress” in addressing data management problems.

“This isn’t the old Citi putting on a band-aid. This is the new Citi facing up to the problems,” Fraser said.

NII Wells Fargo Cliff

Wells Fargo shares fell more than 7% Friday morning after the company reported a 9% drop in net interest income (NII).

The San Francisco-based bank reported $11.92 billion in net profit in the second quarter, which was also below the $12.12 billion analysts expected, according to data compiled by FactSet.

Meanwhile, both revenue and earnings per share beat Wall Street estimates. Revenue rose to $20.7 billion from $20.5 billion in the same quarter a year earlier. Net income fell to $4.91 billion, or $1.33 per share, in the three months ended June 30 from $4.94 billion a year earlier.

“Wells Fargo’s second-quarter results show growth in fee revenue while underscoring continued headwinds in net interest income and operating expenses, as outlined in management’s negatively revised outlook for both areas,” Megan Fox, vice president and senior analyst at Moody’s Ratings Financial Institutions Group, said in a statement.

The bank said it expects the NII to bottom out in the second half of 2024, when the Federal Reserve is likely to start cutting interest rates.

Record Profits — and Some Disappointments — at JPMorgan

JPMorgan’s second-quarter results were met with mixed reactions from the market.

Its shares fell 2% after earnings report after reporting $22.9 billion in NII, up 4% year over year but below Wall Street estimates. The bank also maintained guidance it provided at its annual Investor Day earlier this year. It is worth noting that NII forecasts were maintained at around $91 billion — a forecast that many disappointed investors expected the bank to raise this quarter.

The sky-high NII helped fuel JPMorgan’s record earnings in 2023. But the ratio is expected to largely decline — or, as they say in banking, “normalize” — this year, based on interest-rate cuts expected to be implemented by the central bank later in the year.

“I think it’s definitely too early to talk about the end of the excessive earnings narrative or the normalization narrative,” Chief Financial Officer Jeremy Barnum said in a call with analysts Friday morning. The bank has largely avoided speculation about the Federal Open Market Committee’s decision.

Provisions for credit losses and charges increased more than expected.

But JPMorgan otherwise posted strong inflows that beat analyst estimates. It reported a record quarterly profit of $18.1 billion, or $6.12 per share, in the second quarter — up 25% from $14.5 billion in the same period last year, the bank said in a report. second quarter earnings report Friday. Wall Street analysts had forecast $17.3 billion in profit, or $5.88 in earnings per share, according to FactSet.

The company also reported $50.2 billion in revenue for the three months ended June 30, up 22% year over year and exceeding the $42.23 billion analysts were expecting. That was driven by investment banking fees that jumped 50% and $7.9 billion in new Visa stock gains.