Three big US banks beat profit expectations

NEW YORK: Three big US banks reported strong earnings, even as warning signs emerged that the playing field is beginning to tilt against the financial industry.
While the biggest risk ahead is that lower interest rates will pressure banks’ bottomlines in the coming months, the squeeze is already beginning.
JPMorgan Chase & Co and Wells Fargo & Co both reported drops in net interest margins as they paid more for deposits. JPMorgan, the nation’s biggest bank, lowered its outlook for net interest income to “about $57.5 billion” in 2019 from the $58-plus billion it estimated in February.
On Monday, Citigroup similarly reported a decline in net interest margin.
“We’re not as dynamically correlated to rate changes,” Goldman Sachs Chief Financial Officer Stephen Scherr told analysts, noting the bank holds fewer deposits “than the big commercial banks.”
There was good news in the earnings reports as well. The consumer business remained buoyant, offsetting weakness in other areas. At JPMorgan Chase, average loans increased 2 per cent on the back of an 8 per cent rise in credit-card loans.
And even as investors have been concerned over the impact of the US-China trade spat on global growth, JPMorgan Chief Executive Officer Jamie Dimon remained bullish about the economy. The bank’s performance is often considered a bellwether for the health of the US economy.
JPMorgan’s net income surged 16 per cent to $9.65 billion as a tax gain and higher net interest income overshadowed lower activity on its trading desks. Excluding that tax gain, it earned $2.59 per share. Net revenue rose 4 per cent to $29.57 billion.
At Wells Fargo, meanwhile, net income applicable to common stock rose to $5.85 billion or $1.30 per share, in the second quarter ended June 30, from $4.79 billion, or 98 cents per share, a year earlier.
Analysts had expected a profit of $1.15 per share, according to IBES data from Refinitiv. Goldman Sachs Group Inc’s fixed-income business suffered another disappointing quarter with net revenues falling by 13 per cent, impacted by interest rate products and currencies.
Revenue fell at three of its four major businesses, with the biggest declines in trading and investment management.
Equity trading was a bright spot for Goldman as revenue increased by 6 per cent, its second highest quarterly performance in four years. Goldman said clients were more active than the same period a year ago. — Reuters