Did big banks do better than expected in the first quarter of the year?

Did big banks do better than expected in the first quarter of the year?

Wall Street banks are apparently doing just fine as their shares pop after Q1 earnings results.

by SARA KHAIRI

Wall Street banks reported their Q1 earnings for the year. We take a look at how each of the banks performed.

JPMorgan Chase

• Net income of $12.62 billion, up 52% from the same period last year
• Net revenue jumped 25% to $39.34 billion in Q1 2023
• Expenses came in at $868 million for the quarter

JPMorgan's revenue surpassed analysts' expectations driven by a 49% rise in net interest income to $20.8 billion, owing to the Federal Reserve hiking interest rates. Additionally, the Silicon Valley Bank collapse and Signature Bank fiasco led to significant new account opening activities and deposit inflows in the commercial wing of JPMorgan. However, the bank recorded $868 million in losses on securities.

“The U.S. economy continues to be on generally healthy footings — consumers are still spending and have strong balance sheets, and businesses are in good shape. However, the storm clouds that we have been monitoring for the past year remain on the horizon, and the banking industry turmoil adds to these risks,” CEO Jamie Dimon said in the press release.

Shares of the bank rose 7.5% following the earnings results last Friday.

Citigroup

• Net income of $4.6 billion vs. $4.3 billion in the same period last year
• Net revenue of $21.45 billion, with a 12% increase y-o-y
• A total provision for loan losses of $1.98 billion was recorded for the quarter

Citigroup's quarterly results topped analysts' expectations. The revenue was fueled in part by personal banking revenue rising 18% y-o-y, reflecting higher interest rates. Fixed-income revenue rose 4% y-o-y. However, sharp declines were seen in investment banking and equity market revenue.

“We are in a strong position to navigate whatever environment we face, which is particularly relevant given the degree of uncertainty today. We expect the recent events to be disinflationary and credit to contract. We believe it is now more likely that the U.S. will enter into a shallow recession later this year,” said CEO Jane Fraser.

Shares of the bank rose 4.8% last Friday right after the earnings were reported.

Wells Fargo

• Net income increased to nearly $5 billion, rising by more than 30% in the first quarter from a year ago
• Net revenue rose 17% to $20.73 billion in Q1 2023
• The provision for credit losses came in at $1.2 billion

Wells Fargo's net interest income increased 45% on the back of soaring interest rates. However, the bank faced losses due to flat outcomes in its affiliated venture capital and private equity businesses as well as a slump in mortgage banking income -- as the bank retreated from the housing market. Additionally, it saw a $643 million increase in potential losses related to commercial real estate, credit card, and auto loans.

“Looking ahead, we continue to move forward on our risk and control agenda, which is our top priority. While we have made progress, our work is not done, and we remain focused on completing the work in a timely fashion,” said CEO Charlie Scharf.

The bank’s shares climbed 1% initially but closed Friday’s session 0.1% lower.

Bank of America

• Net income increased 15% to $8.2 billion, or 94 cents per diluted share, from $7.1 billion, or 80 cents per diluted share, a year earlier
• Net revenue rose 13% to $26.3 billion in Q1 2023 from $23.2 billion in Q1 2022
• The provision for credit losses came in at $931 million

Bank of America's net interest income jumped 25% to $14.4 billion during Q1 2023 from a year earlier thanks to rising interest rates. However, the bank saw losses attributable to lower equities trading, and asset management and investment banking fees.

“Everything points to a relatively mild recession, given the amount of stimulus that was paid to people and the money they have left over,” said CEO Brian Moynihan.

BofA shares were up 0.3% in afternoon trading following the earnings results on Tuesday.

Goldman Sachs

• Net income fell to $3.09 billion in the quarter, compared with $3.83 billion a year earlier
• Net revenue fell 5% to $12.22 billion in the first quarter
• Losses came in at $470 million tied to the sale of consumer loans from Marcus. The bank also released $440 million from its reserves to control the damage from its consumer loan portfolio

Goldman Sachs missed analysts' expectations driven by sale write-offs in its consumer business, Marcus. Additionally, the bank saw a sharp fall in bond trading and asset and wealth management results. Global M&A activity shrank to the lowest level in more than a decade in the first quarter. Additionally, the bank is pivoting away from retail banking by exploring the sale of GreenSky, its fresh acquisition of 2021 -- in a move to manage its expenses and focus on its traditional money-making businesses.

"Recent events in the banking sector are lowering growth expectations, and there is a higher risk of credit contractions given the environment is limiting banks' appetite to extend credit," CEO David Solomon told analysts.

Its stock fell 1.7% in afternoon trading on Tuesday.

Morgan Stanley

• Net income was $3.0 billion, or $1.70 per diluted share, compared with net income of $3.7 billion, or $2.02 per diluted share, for the same period a year ago
• Net revenue was $14.5 billion compared with $14.8 billion a year ago
• Losses climbed 4% to $10.52 billion for the quarter

Morgan Stanley gets most of its revenue from wealth and investment management due to multiple acquisitions. Furthermore, the rise in net interest income amid higher rates and loan growth fueled the revenue. In spite of that, the bank's overall revenue got affected as it met with losses in its investment banking and trading sectors -- along with rising expenses driven by compensation costs.

“In my view, we are not in a banking crisis, but we have had and may still have a crisis among some banks. I consider the condition not remotely comparable to 2008,” said CEO James Gorman.

Shares of Morgan Stanley dropped less than 1% in early trading on Wednesday after the bank released its earnings results.

Market recap

Big banks' stocks rallied in the past week after reporting Q1 2023 results

JPMorgan Chase (JPM) - up 9% to $140.81 per share

• JPMorgan Chase made up for its stock price losses for the previous year as the bank kicked off the Q1 earnings season with results beyond analysts' expectations last Friday.
• The bank reported that its first-quarter profit rose to $12.62 billion, or $4.10 a share, from $8.28 billion, or $2.63 a share, in the year-ago quarter.

Morgan Stanley (MS) - up 6% to $90.43 per share

• Morgan Stanley's profits and revenue are down from this time last year. The bank's shares were down about 1% following its earnings results.
• But wealth management, which is the firm's only major division to grow in revenue and profit y-o-y, is helping to soften the hit -- while its stock picked up the pace later in the week.

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