10-Q

Weekly 10-Q: Key takeaways from Wall Street banks’ Q3 earnings results

  • We take a look at how things went for JPMorgan Chase, Morgan Stanley, Wells Fargo, and Citigroup in Q3.
  • And, Amazon wants a bigger slice in the financial services market by selling home insurance in the UK.
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Weekly 10-Q: Key takeaways from Wall Street banks’ Q3 earnings results

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Last week we covered: PayPal backpedals on misinformation policy — faces blowback, stock dips


Key takeaways from Wall Street banks’ Q3 earnings results

JPMorgan Chase, Morgan Stanley, Wells Fargo, and Citigroup reported their latest quarterly results last Friday.

We take a look at each of the big banks’ performance this quarter.

JPMorgan Chase

  • Net Income was $9.7 billion or $3.12 a share, down 17%, driven by a net credit reserve build of $808 million compared to a net reserve release of $2.1 billion in the prior year.
  • Net investment securities losses were $959 million.
  • Net revenue was $33.5 billion, up 10%. Net interest income (NII) was $17.6 billion, up 34%. NII excluding markets was $16.9 billion, up 51%. Noninterest revenue was $15.9 billion, down 8%.

While the bank posted a drop in profit from the year-ago quarter, it performed above analysts’ expectations, according to FactSet, who predicted that profits would be $8.7 billion, or $2.90 a share. The bank faced net investment securities losses in corporate, and lower net production revenue in home lending, largely offset by higher CIB markets revenue. The bank stock closed up 1.7% last Friday after gaining 5.6% on Thursday and is down nearly 34.6% year-to-date.

Morgan Stanley

  • Net income was $2.6 billion, or $1.47 per diluted share, compared with net income of $3.7 billion, or $1.98 per diluted share, for the same period a year ago.
  • Net revenues were $13.0 billion compared with $14.8 billion a year ago. 
  • Investment banking revenue fell 55% to $1.28 billion in the quarter — and investment management revenue dropped 20% to $1.17 billion.

The bank’s investment banking revenue matched the analysts’ estimate, according to StreetAccount, while the investment management revenue was below the $1.29 billion estimate. Morgan Stanley’s investment banking, trading, and investment management operations have all been impacted by the current market stagnation, resulting in collapsed IPO deals that led to a rough quarter for the bank. Shares of the bank slumped 4.8% after the earnings call, and have dropped 19% this year since then.

Wells Fargo

  • Net interest income increased by 36% from the same time last year. 
  • Noninterest income decreased by 25% compared to Q3 2021.
  • Operating losses were $2 billion or $0.45 per share related to litigation, customer remediation, and regulatory matters.
  • Provision for credit losses included a $385 million increase in the allowance for credit losses.

Wells Fargo’s net interest income spiked due to the impact of higher interest rates, higher loan balances, and lower mortgage-backed securities premium amortization, while the non-interest income was driven by a decline in mortgage banking, venture capital, and investment banking income. The stock rose about 1.9% last Friday after climbing more than 4.6% on Thursday — however, the bank shares have fallen 15.5% so far this year.

Citigroup

  • Net income was $3.5 billion and decreased by 25% from the prior-year period.
  • Personal banking operations revenue rose 10% YoY to $4.33 billion.
  • Allowance for credit losses was a net of $370 million, compared with a release of more than $1 billion in the same period last year. The total credit loss provision for the quarter came in at $1.37 billion.

The bank surpassed the revenue expectations by analysts at Refinitiv, who predicted revenue of $18.25 billion, due to growing net interest income as interest rates have climbed. However, the bank had a choppy quarter as it bulked up its credit loss provisions and investment banking slumped. Citigroup shares have slumped 29% this year.


Top stories of the week

AMAZON
Amazon expands its push into financial services in the UK
Amazon will start selling home insurance in the U.K. through partnerships with three local insurers, securing a commission on each sale from its partners. Customers can apply for home insurance on Amazon by filling out a questionnaire, focusing on their home insurance needs. They will then be directed to a list of quotes from Amazon’s insurance partners, along with reviews and ratings from other customers. Once a policy is finalized, users can pay for it using Amazon’s online checkout. Initially, the service will be available for select customers but will expand across the U.K. by the end of this year. (Finovate)

GOLDMAN SACHS
Goldman Sachs to reorganize its businesses, as Marcus takes a backseat
Goldman Sachs plans to reorganize its biggest businesses into three divisions. The asset management and private wealth businesses will merge into one unit, whereas its retail banking wing, Marcus, will be divided into two groups. The platform’s consumer-focused operations will fall under Goldman’s asset- and wealth-management unit — and the subset of Marcus’ business that deals with corporate clients will become a stand-alone entity called Platform Solutions. The reshuffle comes as the bank aims to scale back its ambitions for Marcus amid mounting losses and growing skepticism over its performance. (WSJ)

JPMORGAN CHASE
JPMorgan sets up a fundraising platform to entice startups

JPMorgan Chase is bringing out a new platform, Capital Connect, to connect startup founders with venture capital investors in order to streamline the fundraising process — and enable startups to fundraise as early in the process as the Series A round. Additionally, startup founders can ask for introductions to investors, build virtual data rooms and potentially trade their company shares on a secondary market through the Capital Connect website. The move comes as the bank aims to get a bigger slice of the private market and establish its brand in Silicon Valley. (Reuters)

JPMorgan Chase is the latest bank to offer early payday services
Customers of Chase Secure Banking can now get access to their paychecks up to two days early — Wednesday instead of Friday — with no additional fee. The new service applies to payroll, tax refunds, pensions, government benefits, and certain other direct deposits that cover nearly 90% of Secure Banking direct deposits. Eligible customers will be automatically enrolled in the new service starting this month. (CNBC)

PAYPAL
PayPal launches PayPal Rewards

PayPal is introducing a new rewards program, PayPal Rewards, that lets customers shop, earn, track, save, and redeem rewards — and integrate them into one experience when checking out with the app. The new program will replace “Honey Gold,” a Honey browser extension rewards program — which provides PayPal a competitive edge by offering users promo codes and coupons from retailers for better prices and personalized deals. The company will now combine the rewards being offered across multiple PayPal products, including the Honey browser extension, the PayPal app, and, in the future, various card products. (TechCrunch)

SQUARE
Square launches Square for Retail and Square Appointments
As the holidays approach, Square is launching two of its niche software solutions, Square for Retail and Square Appointments, on Square Terminal to sellers around the globe. Retailers and beauty and personal care professionals can now offer customers flexible, on-the-go checkout experiences for additional convenience and time savings. Additionally, businesses can ring up customers almost anywhere, making it easier to help sellers handle consumer demand wherever they are. (Yahoo)


Tweet of the week

Source: Holger Zschaepitz

Chart of the week

Non-traditional investor participation surpasses $145 billion in Q3’22

Source: PitchBook

What’s trending

  • Chase regains ground lost to Square, PayPal, and Stripe by integrating banking and digital payments for SMBs (The Financial Brand)
  • BlackRock, Citi CEOs won’t be returning to key climate talks (Bloomberg)
  • US digital bank Green Dot fires CEO, appoints George Gresham as a replacement (PYMNTS)
  • FIS appoints Stephanie Ferris as president and CEO (Finextra)

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