July 14, 2024

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JPMorgan Stock Falls Despite Strong Earnings; Citigroup, Wells Fargo Mixed

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JPMorgan Chase (JPM) beat Q4 forecasts Friday, while Citigroup (C) and Wells Fargo (WFC) reported mixed results, amid hopes that the financial sector can begin digging out from a tough year battered by Covid-related slowdowns. JPMorgan stock and other banks fell.


Bank stocks have rallied on stimulus hopes and expectations of a post-pandemic economic recovery. Widening yield spreads between short-term and long-term Treasuries bolster lending margins.

JPMorgan Earnings

Estimates: Analysts polled by Zacks Research estimated JPMorgan earnings per shares of $2.72, up 6% vs. a year earlier, with revenue rising 3% to $29.28 billion. 

Results: EPS of $3.79, or $3.07 after excluding a $2.9 billion credit reserve release, on revenue of $30.16 billion. Net interest income fell 7% to $13.4 billion.

Consumer banking revenue dropped 8% to $12.73 billion. Fixed income trading revenue grew 15% to $4 billion. Equity trading revenue jumped 32% to $2 billion. Investment banking revenue surged 37% to $2.5 billion. Commercial banking revenue rose 7% to $2.46 billion. Wealth management revenue increased 10% to $3.87 billion.

“While positive vaccine and stimulus developments contributed to these reserve releases this quarter, our credit reserves of over $30 billion continue to reflect significant near-term economic uncertainty and will allow us to withstand an economic environment far worse than the current base forecasts by most economists,” CEO Jamie Dimon said.

Stock: Shares closed down 1.8% at 138.64 in on the stock market today, after clearing a buy point of 141.20 from a cup base intraday, according to MarketSmith chart analysis.

Meanwhile, Bank of America (BAC) and Goldman Sachs (GS), which both report Tuesday, were down 2.9% and 2.2%, respectively on Friday.

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Citigroup Earnings

Estimates: Citigroup earnings are expected to fall 29% vs. a year earlier to $1.35 a share. Revenue is seen falling nearly 10% to $16.58 billion.

Results: EPS of $2.08 on revenue of $16.5 billion. Consumer banking revenue fell 14% to $7.3 billion. Investment banking revenue slipped 5% to $1.3 billion. Fixed income trading revenue grew 7% to $3.1 billion, and equity trading revenue jump 57% to $810 million.

Stock: Shares sank 6.9% to 64.23. Citigroup stock gapped following the Senate runoff election in Georgia. While a Democrat-led Congress could mean more regulatory policy is coming, hopes are up for bigger stimulus spending.

Wells Fargo Earnings

Estimates: Wells Fargo earnings were seen sliding 37% to 59 cents a share, with sales down 9% to $18.02 billion.

Results: EPS of 64 cents on revenue of $17.93 billion.

Stock: Shares dived 7.8% to 32.04 Friday.

On Thursday, Reuters reported that Wells Fargo was in talks to sell its asset management business, valued at $607 billion, to a private equity group led by GTCR and Reverance Capital Partners.

The price of the deal is not known, but it has been previously reported that Wells Fargo was seeking more than $3 billion for the unit.

JPMorgan Stock, Bank Stocks In 2021

Industry analysts say banks appear sound enough to absorb the economic shock from a health care crisis.

Indeed, following a stress test, the Federal Reserve in December gave top banks the go-ahead to resume share buybacks in Q1. The Fed added that repurchases can only resume if a bank’s dividends and Q1 buybacks don’t combine to exceed average earnings per quarter over the last four quarters.

Meanwhile, banking stocks have benefited from robust trading revenue in 2020. IPO activity also has picked up. CFRA analyst Kenneth Leon says equity underwriting remains a pivotal area for 2021 growth and sees a strong IPO pipeline. He notes that global IPO activity tallied $82.9 billion in Q4 2020, the largest three-month period since 2010, according to Refinitiv.

Leon says mergers and acquisitions are also likely to increase in 2021. M&A activity totaled $3.6 trillion in 2020, down 5% from 2019. But the second half of 2020 was marked by a 90% jump vs. the first half of the year, making it the strongest second half since 1980.

Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.


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