In the recent period, the U.S. stock market has seen a peak in the release of bank stocks' financial reports, as of now, $JPMorgan (JPM.US)$Please use your Futubull account to access the feature.$Goldman Sachs (GS.US)$ and many banks have already announced their performance, with impressive financial report performances. $Morgan Stanley (MS.US)$Please use your Futubull account to access the feature.$U.S. Bancorp (USB.US)$ The earnings will be released before the market open today.

In the stock market, recent performance of U.S. bank stocks has also been impressive, with Goldman Sachs, $Wells Fargo & Co (WFC.US)$ and other stocks hitting new highs in recent days. Yesterday, JPMorgan, Goldman Sachs, Wells Fargo & Co., Morgan Stanley, $Bank of New York Mellon (BK.US)$ all hit new all-time highs intra-day yesterday, but later the stock prices rose and fell, with bank stocks closing with mixed movements. Among large U.S. bank stocks this year, Bank of New York Mellon has led with a cumulative increase of nearly 50% as of yesterday, Goldman Sachs has risen over 38%, JPMorgan and Wells Fargo & Co. have both risen over 30%.

Tracking the 24 largest banks in the USA $KBW Nasdaq Bank Index (.BKX.US)$ It rose nearly 2% during the day, hitting the highest closing price since April 2022, with a closing increase of 0.28%. The index broke the latest high point before the outbreak of the U.S. regional banking crisis marked by the bankruptcy of Silicon Valley Bank in February 2023 last Friday.

The Q3 financial performance of Wall Street major banks was impressive.

The U.S. stock earnings season started last Friday, with JPMorgan, Wells Fargo & Co., and Bank of New York Mellon leading the way in announcing Q3 financial results, all of which exceeded analysts' expectations. Yesterday, Goldman Sachs, U.S. Bancorp, $Bank of America (BAC.US)$ both turned in excellent results, with revenues and net interest income surpassing market expectations; $Citigroup (C.US)$ Q3 revenues exceeded market expectations, but net interest income was lower than the same period last year.

JPMorgan's third-quarter revenue was $43.32 billion, higher than the expected $41.9 billion; net income was $12.9 billion, a 2% year-on-year decrease, but still higher than expected; net interest income was $23.5 billion, a 3% year-on-year increase; investment banking revenue was $2.27 billion, a 31% year-on-year increase, exceeding the expected 16%, ranking first in global investment banking revenue.

Goldman Sachs reported net revenue of $12.7 billion in the third quarter, a 7% year-on-year increase, surpassing the expected $11.77 billion; with profits of $3.987 billion, a soaring 45% year-on-year, benefiting from a significant increase in investment banking performance and unexpected support from stock trading income; net interest income of $2.62 billion, also exceeding the estimated $1.84 billion; Fixed Income, Currency, and Commodities (FICC) revenue reached $2.96 billion, setting a new quarterly record; earnings per share of $8.40, a 54% year-on-year increase, higher than the expected $6.89.

Wells Fargo & Co's third-quarter revenue was $20.4 billion, a 2.4% year-on-year decrease; investment banking expenses increased by 37% to $0.672 billion, helping boost non-interest income, which increased by 12% to $8.7 billion during the same period; adjusted earnings per share were $1.42, higher than the market's general expectation of $1.28.

Bank of America's third-quarter revenue was $25.49 billion, a slight increase of less than 1% year-on-year, but exceeds the market's expected $25.3 billion; net income decreased by 12% to $6.9 billion compared to the same period last year; net interest income was nearly $14 billion, slightly higher than the analysts' expectations; fixed income, currency, and commodities (FICC) revenue increased by 12% year-on-year. BofA expects the company's net interest income (NII) to continue growing.

Citigroup's third-quarter revenue was $20.32 billion, a 0.9% year-on-year increase, exceeding market expectations; net income was $3.2 billion, a 9% decrease year-on-year; net interest income was $13.4 billion, lower than the second quarter's $13.5 billion and the same period last year's $13.8 billion. Due to increased losses in the credit card business, Citigroup recorded $2.7 billion in provisions during the period.

Bank of New York Mellon's third-quarter revenue reached $46 billion, a 5% year-on-year increase; earnings per share significantly increased to $1.50, a 22% year-on-year increase; net interest income increased by 3% year-on-year; pre-tax profit margin and return on tangible common equity both increased to 33% and 23% respectively.

Morgan Stanley and U.S. Bancorp will release their earnings before the market open today.

Investment banking business performance is excellent, with net interest income exceeding expectations.

Major U.S. banks have exceeded market expectations in net interest income. Wall Street analysts had initially predicted that net interest income of major U.S. banks in the third quarter would decline, as banks gradually raised deposit rates before the Fed's rate cut in September, squeezing the space for net interest income; net interest income may once again be constrained by slow loan growth, and the ongoing process of bottoming out of the net interest margin may pause.

However, JPMorgan surpassed this expectation, with a 3% unexpected year-on-year increase in Q3 net interest income, while raising its 2024 net interest income outlook from $91 billion to around $92.5 billion. Goldman Sachs and Bank of America also exceeded market expectations for Q3 net interest income. Although Wells Fargo stated that the last quarter's net interest income will be worse than previously expected, it raised its outlook for 2025.

The performance of Wall Street's major banks' investment banking operations has been impressive. Previously, analysts generally believed that the investment banking business of major banks in the United States would grow compared to the same period last year in the third quarter, with strong expectations for new stock offerings and bond underwriting.

JPMorgan Chase's Q3 investment banking revenue was $2.27 billion, a significant increase of 31% year-on-year, exceeding expectations by 16%, ranking first in global investment banking revenue; Goldman Sachs saw a 45% surge in Q3 profits, benefiting from a significant increase in investment banking performance and unexpected support from stock trading revenue; Wells Fargo's Q3 investment banking expenses rose by 37% to $0.672 billion, boosting non-interest income.

Over the past two years, the Federal Reserve has aggressively raised interest rates to suppress inflation, leading large companies to become cautious in major decisions such as acquiring small competitors or selling parts of their business, which are core businesses for investment banks. As the Federal Reserve begins to reverse its monetary policy, the business of investment banks will continue to recover.

The US economy may have achieved a soft landing, and bank stocks are expected to rise during the rate cut cycle.

As the financial reports of major U.S. banks are gradually released, a positive outlook on bank stocks is emerging in the market. Analysts believe that the strong financial reports of Wall Street banks may indicate that the U.S. economy has achieved a so-called "soft landing"; during rate cut cycles and soft landings, financial stocks often perform well.

Wells Fargo previously stated that in the event of an economic soft landing and expected rate cuts, bank stocks are expected to rebound and outperform benchmark indices. The bank's analysis stated that historically, rate cuts in the absence of an economic recession have been favorable for bank stocks. For example, in 1995, 1998, and 2019, rate cuts stimulated the rise of U.S. bank stocks. Against the backdrop of an economic soft landing, the increase in U.S. bank stocks in the quarter following the first rate cut exceeds the S&P 500 index by nearly 10%.

UBS Global Wealth Management Analysts pointed out that since the Federal Reserve has already begun an interest rate cut cycle, the economy should receive further boost from the reduction in interest rates on credit card debt, commercial loans, and other aspects. Apollo Global Management analyst Torsten Slok stated to the media last Friday that in a rate cut cycle ending with a 'soft landing', financial stocks have always been one of the best-performing sectors.

However, some believe that after the two-year tightening cycle, banks' loan profits, namely net interest income, are expected to face pressure from the decline in U.S. interest rates. Last month, JPMorgan Chase President Daniel Pinto stated that analysts' forecasts for next year's expenses and net interest income are overly optimistic. He also mentioned that given the rate expectations, the current net interest income estimate is"unreasonable".

In addition, the market has been closely watching the continuous reduction in Bank of America's stocks. $Berkshire Hathaway-A (BRK.A.US)$ / $Berkshire Hathaway-B (BRK.B.US)$Since the middle of July, Warren Buffett's Berkshire Hathaway has been selling Bank of America stocks, and very frequently. Following the latest selling action last week, Berkshire's stake in Bank of America has dropped to 9.987%, below the "regulatory threshold" of 10%, thus Berkshire no longer needs to report its relevant transactions promptly.

Last year, Buffett expressed a pessimistic view on the banking crisis in 2023. Buffett believes that the bank failures during the 2008 global financial crisis and in 2023 have weakened public confidence in the system, and the ineffective communication by regulatory agencies and politicians has made the situation worse. Meanwhile, digitalization and financial technology have simplified banks' operations during crises.

Editor / jayden