Weekly 10-Q: The big question — how did Wall Street banks perform this quarter?

10-Q provides weekly insight into the moves of top financial and fintech stocks over the past week. A new issue lands in your inbox every Friday. Stay ahead. Subscribe here.

Last week we covered: What is Marqeta doing differently in payments? – 3 questions with the COO of Marqeta, Vidya Peters

How did Wall Street banks perform this quarter?

Goldman Sachs

• Net income fell 48% to $2.79 billion, or $7.73 a share.
• Net revenue fell to $11.8 billion from $15.3 billion in Q2 21.
• Net interest income came out to $1.73 billion which is more than $1.6 billion in Q2 21.
• The provision for credit losses was $6.6 billion compared to $9.2 billion in Q2 21.

The bear-market induced decline of M&A throughout the industry impacted Goldman Sachs. Goldman also tends to benefit from rising asset prices through its various investment vehicles, and so declines in financial assets hit the firm in the quarter.

Bank of America

• Net income of $6.2 billion, or $0.73 per diluted share.
• Total revenue, net of interest expense increased 6% to $22.7 billion, from $21.5 billion in Q2 21.
• Noninterest expense increased by $228 million, or 2%, to $15.3 billion. 
• Provision for credit losses of $523 million increased by $2.1 billion

The increase in net interest income is a result of the lender reaping the benefits of Federal Reserve rate hikes, while second-quarter results were impacted by higher expenses related to regulatory settlements. 

Morgan Stanley

• Net income was $2.5 billion, or $1.39 per diluted share, compared with net income of $3.5 billion, or $1.85 per diluted share in Q2 21.
• Net revenue was $13.1 billion compared to $14.7 billion in Q2 21.
• Provision for credit losses was $101 billion from $73 billion in Q2 21.

The bank hinted at the current macro environment, the Russian invasion of Ukraine, the long tail of the pandemic, and inflation -- as influencing factors on its earnings.

Citi

• Net income of $4.5 billion, or $2.19 per diluted share compared to net income of $6.2 billion, or $2.85 per diluted share.
• Net revenue rose to $19.6 billion compared to revenue of $17.8 billion for Q2 21, up by 11%.
• The provision for credit losses is $1.2 billion, compared to $1.0 billion in Q2 21.

Citi exceeded its revenue expectations as the bank reaped more interest income and saw strong results in its trading division and institutional services business. 

JPMorgan Chase

• Net income was $8.6 billion, down 28%, predominantly driven by a net credit reserve build of $428 million compared to a net release of $3.0 billion in the prior year, or $2.76 per diluted share.
• Net revenue was $31.6 billion, up 1% from Q2 21.
• Noninterest expense was $18.7 billion, up 6%, driven by continued investments in the business, including technology and marketing, and higher structural expense, primarily compensation, partially offset by lower revenue-related compensation.
• The provision for credit losses was $1.1 billion, compared to $3.3 billion in Q2 21.

The downturn in Wall Street deals struck JPMorgan, which has one of the biggest operations on the Street. Investment banking fees fell and revenue in that division was impacted by $257 million in markdowns on positions held in the firm’s bridge loans portfolio.

Top stories of the week

CFPB
The fintech industry isn’t opposing regulation, but it does want to know what the rules of the road are
The Consumer Financial Protection Bureau’s decision to end temporary “safe harbors” for two financial technology companies, Upstart and Payactiv, was done through mutual agreement but is still raising eyebrows in the industry. While the CFPB may continue to process new applications, people expect the bureau's disparagement of the programs will lead most companies to reassess whether applying is worth the investment of time, effort, and cost required to do so. (Roll Call)

CITI
Citi is waiving fees on P2P Payments by accepting them as direct deposits
To serve the underserved, Citigroup will now count payments from peer-to-peer services as direct deposits enabling customers to get rid of the monthly fees on checking accounts. The new move will apply to the Access and Basic checking accounts, which come with $10 and $12 monthly fees – provided the consumers don’t make a bill payment or maintain a certain amount. Citi is the only FI that ranks among the top four in the US that accepts P2P payments this way. (PYMNTS)

Citi Commercial Bank debuts in Canada
Citi has launched Citi Commercial Bank (CCB) in Canada as part of a global expansion announced earlier in 2022. CCB will roll out Citi's portfolio of institutional products and solutions to mid-size corporates as they grow rapidly and expand internationally. Citi has hired Casey Coates as the Head of CCB for Canada. (Seeking Alpha)

COINBASE
Ex-Coinbase manager among 3 arrested on crypto insider trading fraud
The US Department of Justice charged former Coinbase product manager Ishan Wahi, his brother Nikhil Wahi, and Sameer Ramani with allegations of wire fraud and insider trading. The DOJ alleged Ishan Wahi shared information about at least 14 different listings at Coinbase – the defendants used anonymous Ethereum wallets and exchange accounts in other people's names to buy at least 25 different cryptocurrencies and potentially earned some $1.1 million. (CoinDesk)

Coinbase assures no exposure to collapsed crypto firms
Coinbase claims it “had no financing exposure” to Celsius, Three Arrows Capital, and Voyager Digital – trying to ease fears about the impact of a liquidity crisis in the industry on its business. Each firm filed for bankruptcy protection after a sharp decline in digital token prices set off an avalanche of liquidations in highly leveraged positions. Shares of Coinbase closed up more than 14% on Wednesday. (CNBC)

GOLDMAN SACHS
Goldman Sachs overhaul gets a pre-recession hit
Despite deal-making and investment moves, the second quarter has been a mixed bag of a collapse in deal fees and high trading revenue. While trying to strike a balance, CEO Solomon hinted towards more predictable fee-and-interest income has received a helpful pre-recession blow. Its revenue from investment narrowed to half in the second quarter, year-on-year, but at $1.8 billion was still bigger than what JPMorgan, Morgan Stanley, Citigroup, and Bank of America managed. (Reuters)

GOOGLE
The new Google Wallet has made an entrance
The new Google Wallet has begun appearing on phones in dozens of countries -- it is replacing the Google Pay app (though both will be available in the US and Singapore) and will let users manage their payment cards, rewards cards, gift cards, as well as event tickets, ID, and more. So far, it is being rolled out in 39 countries. (Finextra)

JPMORGAN CHASE
JPMorgan uses a big chunk of capital to take on direct lenders
JPMorgan Chase has arranged a unit to compete with rising competitors from direct lenders, committing an “important chunk of capital” to carry leveraged loans on its balance sheet. The move is an early sign of how banks may realign their leveraged lending operations to win favor with purchasers and again secure market share from Apollo, Ares, and Golub Capital. (FT)

ROBINHOOD
Options trading in cash accounts is now available at Robinhood
Options trading in cash accounts is now available to all eligible Robinhood customers. Options trading is the trading of instruments that enables a trader to buy or sell specific security on a said future date and at a stated price. Options trading entails significant risk and is not appropriate for all customers, which is why all interested customers must apply for options access and have their accounts reviewed to determine if they are qualified. Earlier, Robinhood’s advanced customers could only trade stocks and ETFs. (Seeking Alpha)

VISA
Visa is looking to invest in fintech Airwallex
Visa is in talks to join an extension of the cross-border payment firm Airwallex’s latest funding round. The startup is seeking to raise $100 million to $150 million in an extension to its series E round, which is $5.5 billion from the previous fundraising. Other existing investors could also participate in the round (Bloomberg)

Tweets of the week

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Charts of the week

1. Unbundling Bank of America

2. How does Card as a Service work for fintechs?

What's trending

Wall Street texting habit costs banks a total $1 billion bill (Bloomberg)

Fintechs that boomed during lockdowns are hit by fears they cannot withstand a recession (FT)

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