Source: Wall Street News

$JPMorgan (JPM.US)$,$Citigroup (C.US)$,$Wells Fargo & Co (WFC.US)$,$Blackrock (BLK.US)$Earnings were released before the market on Friday. Wall Street financial giants showed mixed performance. J.P. Morgan's net interest income guidance fell short of expectations, and Wells Fargo's net interest income fell short of expectations, indicating that the benefits brought to banks by high interest rates may be declining. Citigroup's FICC sales and transaction revenue in the first quarter exceeded expectations, and BlackRock's net capital inflow fell short of expectations. Major bank stocks generally declined on Friday.

J.P. Morgan Chase: Net interest income ends record high for seven consecutive quarters

J.P. Morgan Chase's full-year net interest income outlook was slightly lower than analysts' expectations and raised its fee guidance for the full year, causing the stock price to fall on Friday. Analysts believe this indicates that the benefits of high interest rates to the bank may be weakening, while facing more pressure to pay savers.

According to J.P. Morgan's weekly earnings report, adjusted revenue for the first quarter was 42.55 billion US dollars, higher than the market estimate of 41.64 billion US dollars. Net interest income for the first quarter was US$23.1 billion, up 11% from the previous year. However, J.P. Morgan still expects net interest income of about US$90 billion for the full year. This does not include the increase in net interest income expectations for the full year as anticipated by the market. This does not include the increase in net interest income guidance for the market business to about US$89 billion. Meanwhile, the bank predicts adjusted expenses for the whole year to be around US$91 billion, higher than previously anticipated.

Meanwhile, J.P. Morgan Chase's loan of 1.31 trillion US dollars in the first quarter was less than the market estimate of 1.33 trillion US dollars; the return on net assets for the first quarter was 17%, higher than the market estimate of 15.9%. Investment banking revenue for the first quarter was US$1.99 billion, higher than analysts' expectations. Additionally, costs increased by 13% in the first quarter, mainly due to higher pay and $725 million in additional Federal Deposit Insurance Company (FDIC) assessment fees due to the acquisition of two Lightning Banks last year.

At this point, J.P. Morgan Chase's net interest income ended the record for seven consecutive quarters of record highs. J.P. Morgan CEO Jamie Dimon (Jamie Dimon) said that the reduction in the gap between interest earned by banks on loans and interest payments on deposits, as well as a decrease in deposit balances in consumer businesses, are the reasons for the decline in net interest income.

“Looking ahead, we expect net interest income and credit costs to continue to normalize,” Dimon said.

As net interest income fell short of expectations, J.P. Morgan Chase plummeted 6.47% to $182.79 by the close of the day.

Some analysts were disappointed with J.P. Morgan Chase's loan revenue and performance guidelines. Analysts said that it was expected that net interest income would maintain the original trend and raise the net interest income guidelines, “but as Jamie always told us, the party that shattered expectations and raised guidelines will eventually come to an end.”

Dimon has been warning for months that inflation may be more stubborn than market forecasts, and wrote in Monday's annual shareholder letter that J.P. Morgan is ready to handle interest rates “or higher” from 2% to 8%. He said on Friday that although some economic indicators are still favorable, many uncertainties such as war, geopolitical tension, and inflationary pressure still exist.

“We don't know how these factors will evolve, but we have to prepare the company for every possible environment to ensure we can always serve our customers,” he said.

Wells Fargo: Net interest income will drop 7%-9% this year

Like J.P. Morgan Chase, Wells Fargo's net interest income for the first quarter fell short of expectations.

According to financial reports, Wells Fargo's revenue for the first quarter was US$20.86 billion, higher than the market estimate of US$20.01 billion. Earnings per share of $1.2; corporate and investment banking revenue of $4.98 billion. Net interest income for the first quarter was $12.2 billion, down 8.3% year over year, below analysts' expectations of $12.3 billion.

Wells Fargo attributed the decline in net interest income in the first quarter to the impact of higher interest rates on financing costs, including customers moving funds to higher-yielding accounts and lower loan balances. The company still expects net interest income this year to drop 7% to 9% from the $52.4 billion in 2023, reaffirming the forecast given in January.

Compared with the same period last year, total deposits increased slightly in the first quarter, driven by a surge in interest-bearing deposits. Interest-free funding declined by 18% during this period.

Meanwhile, Wells Fargo also reported $1.15 billion in net bad debts, including $187 million relating to commercial real estate. Chief Financial Officer Mike Santomassimo said in February that the company's commercial real estate portfolio “looked pretty good for the most part,” but warned that issues in this area would take time to resolve.

Additionally, Wells Fargo's first-quarter expenses were $14.3 billion, worse than analysts' expectations. This was mainly due to the Federal Deposit Insurance Company's special assessment fee of $284 million due to the explosion of regional banks last year.

Wells Fargo fell 0.39% to $56.47 on Friday by the close.

Citigroup: Increased corporate financing and consumer card loans

However, Citigroup was not in the same situation as J.P. Morgan Chase and the Wells Group. Financial reports showed that revenue, profit, and net interest income for the first quarter all exceeded analysts' expectations. Analysts believe that in a high interest rate environment, corporate financing and consumer card loans have increased, making Citi profitable.

According to financial reports, Citigroup's revenue for the first quarter was US$21.1 billion, higher than market estimates of US$20.38 billion, up 3% year on year; net interest income of US$13.51 billion, up 1.2% year on year, higher than analysts' expectations; and net profit of US$3.4 billion, earnings per share of US$1.58, higher than analysts' expectations of US$1.23. FICC's sales and transaction revenue for the first quarter was US$4.15 billion, higher than market estimates of US$4.12 billion; stock sales and trading revenue was US$1.23 billion, higher than market expectations of US$1.11 billion; investment banking revenue was US$903 million, higher than the market estimate of US$776.9 million; and total credit costs were US$2.37 billion, lower than the market estimate of US$2.64 billion. Meanwhile, Citi's guidelines for maintaining revenue and expenses throughout the year remain unchanged.

According to media reports, as the market anticipates that the Fed will wait longer to cut interest rates, Citi's key business line earnings have increased, and more companies are choosing Citibank to help issue bonds rather than wait. At the same time, consumer spending on credit cards has increased, and so has card debt.

Investors have been keeping a close eye on Citigroup's earnings as CEO Jane Fraser is implementing a corporate restructuring plan involving the reduction of 20,000 jobs. Citi said it had cut 7,000 jobs by the end of the first quarter. Citigroup CFO Mark Mason said during the earnings call, “We are still working to eliminate stranded costs. We are also looking forward to increased efficiency over the next few years.”

Citigroup's business restructuring will result in “a clearer and simpler management structure that fully complies with and promotes our strategy,” Fraser said in a statement. “We have made good progress by retiring several old platforms, streamlining end-to-end processes, and strengthening our risk and control environment.”

Due to positive performance, Citigroup's US stock market opened 2.7% higher on Thursday, but then was dragged down by the market and closed down 1.7% to $59.68.

Analysts believe that companies avoided financing when the Federal Reserve raised interest rates rapidly, but once they had a clearer understanding of the future, they returned to the market to raise capital and consolidate their financing. As investors' expectations of the Fed's interest rate cut this year cool down, Citibank's business may further benefit.

In terms of capital markets, Citibank's capital markets division's revenue from debt underwriting has exceeded expectations, but M&A consulting activities are still sluggish.

BlackRock: Net capital inflow falls short of expectations

BlackRock, the world's largest asset management company, surpassed expectations in the first quarter, with total assets reaching a record $10.5 trillion, but the net inflow of capital fell short of expectations.

According to financial reports, BlackRock's revenue for the first quarter was 4.73 billion US dollars, higher than the market estimate of 4.68 billion US dollars, an increase of 11% over the previous year. Adjusted earnings per share of $9.81 were higher than market estimates of $9.34. Net capital inflows of 76 billion US dollars were absorbed in the first quarter, which fell short of analysts' expectations of 85 billion US dollars. The asset management scale was $10.47 trillion, higher than the market estimate of $10.43 trillion.

According to financial reports, capital inflows for the first quarter included $67 billion to ETFs and $42 billion to fixed income funds. Customers have also withdrawn $19 billion from BlackRock's independent cash management business and money market funds, and investors have injected $14 billion into the company's Bitcoin ETF since mid-January, the data shows.

The company issued $3 billion in debt to finance its planned acquisition of global infrastructure partners. BlackRock said it bought back 375 million dollars of shares this quarter and raised its dividend by 2% to $5.10 per share.

BlackRock's stock price closed down 2.87% to $763.4 on Friday.

editor/tolk