FX168 Financial News (North America) - On Friday, October 11, JPMorgan and competitor Wells Fargo & Co. released their third-quarter financial reports, while Bank of America, Citigroup, Goldman Sachs, and Morgan Stanley are set to release their reports next week. As the Federal Reserve enters the next phase of achieving the U.S. economyBut after the bursting of the internet bubble and the Fed's rate cut in 2001, the ROI dropped by more than 10%.a fresh perspective on the impact on the largest financial institutions in the United States for investors.

jpmorgan

JPMorgan announced an unexpected increase in net interest income for the third quarter and raised its forecast for this major source of income, despite market expectations of further U.S. rate declines.

The bank's Wall Street business revenue also exceeded analyst expectations, with investment banking fees growing by 31%, surpassing the anticipated 16%. Stock trader revenue increased by 27%.

Despite the strong performance, CEO Jamie Dimon's outlook on the economy is somewhat pessimistic.

Dimon said in a statement on Friday: "Although inflation is slowing down, the U.S. economy remains resilient, but there are still some key issues, including massive fiscal deficits, infrastructure needs, and trade restructuring." On geopolitical crises, Dimon said, "The situation is very dangerous and getting worse, with potential far-reaching impacts on short-term economic results and, more importantly, on historical processes."

After the Federal Reserve implemented its first rate cut in over four years last month, analysts have begun to lower expectations for bank loan business revenue. However, JPMorgan stated that its net interest income grew by 3% to $23.4 billion, exceeding the slight decline expected. The bank stated that net interest income for 2024 will reach around $92.5 billion, compared to the previous forecast of about $91 billion.

JPMorgan's stock price has risen by 25% year to date as of Thursday.

Wells Fargo & Co

Wells Fargo & Co announced third-quarter profits exceeding analyst expectations, as a sharp increase in investment banking costs helped offset the decline in loan income caused by interest rate cuts.

The San Francisco-based bank stated on Friday in a release that third-quarter investment banking costs rose by 37% to $0.672 billion. This helped boost non-interest income, which rose by 12% to $8.7 billion for the quarter.

The company's quarterly net income declined by 11% to $5.1 billion, or $1.42 per share, due to losses of $0.447 billion on debt securities held by the company when adjusting its investment portfolio. Excluding these losses, earnings per share should be $1.52, while the average Bloomberg analyst expectation was $1.28 per share.

CEO Charlie Scharf stated in a release: 'Our earnings outlook is significantly different compared to five years ago because we have strategically invested in many businesses, while downsizing or selling other businesses.'

Under Scharf's leadership, the company has been expanding its investment banking business. Scharf mentioned earlier this year that opportunities are 'right in front of us.'

The stock price of Wells Fargo & Co has risen 17% as of Thursday this year.

Issues Facing the Banking Industry

After the Federal Reserve cut the benchmark interest rate by half a percentage point on September 18, and is expected to further reduce the rate in the next two years, many investors are more concerned about what changes will occur in future profit margins as borrowing costs start to decline.

The largest financial institutions have started reducing fees charged to new borrowers, thereby cutting off an important source of interest income. With the Fed raising interest rates, this source of income will boost bank profits in 2022 and 2023.

However, they are also likely not to need to pay too much to retain customer deposits, which can lower their costs and increase profit margins over time.

All of these developments remain uncertain, and investors will be watching for any changes in future prospects due to the Fed's new interest rate path.

Scott Siefers, Managing Director and Stock Analyst at Piper Sandler, told Yahoo Finance: "I am somewhat anxious about the annual trends and how banks are dealing with rapid interest rate fluctuations."