Wells Fargo outshines JPMorgan as big banks kick off the fourth-quarter earnings season

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Shares of JPMorgan Chase & Company headed for their biggest one-day loss since March 2020 on a busy Friday of fourth-quarter bank earnings.

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Wall Street investors penalized JPMorgan Chase shares JPM Falling 4.8%, the stock’s biggest one-day slide since March 2, 2020, when it lost 4.91%. Meanwhile, Citigroup C,
-2.21%
2.4% and Wells Fargo & Co. dropped from WFC,
+3.37%
bucked the trend with a positive jump of 4.6 percent.

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Despite the drop in its share price on Friday, JPMorgan stock remains up 1% since the start of 2022, after rising 14% over the past 12 months. Wells Fargo is now up 21% since January 1, including Friday’s gain, while Citigroup is still up about 9.6% so far in 2022.

Wells Fargo’s 2022 guidance also dashed expectations, while JPMorgan’s outlook fell short.

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In 2022, Wells Fargo expects to increase 8% from its net interest income of $35.8 billion, or about $38.66 billion. That figure would beat the latest analyst consensus estimate of $37 billion in net interest income in 2022, according to a survey by FactSet.

Meanwhile, JPMorgan Chase JPM,
-5.24%
Net interest income is expected to be around $50 billion in 2022, well below the latest Wall Street target of $55.7 billion. JPMorgan Chase also expects about $77 billion in adjusted non-interest expense. Jefferies analyst Ken Usdin said the company’s cost target is about 6% higher than Wall Street’s estimate.

JP Morgan’s profits fall by nearly $2 billion

JPMorgan Chase said its fourth-quarter net income fell from $10.4 billion, or $3.33 per share, to $12.14 billion, or $3.79 per share, in the year-ago quarter. The results included a gain of $1.8 billion, or 47 cents per share, from the issuance of credit reserves.

Managed revenue grew 1% to $30.3 billion, with revenue of $29.3 billion.

According to FactSet, MegaBank was expected to earn $3.01 per share and generate revenue of $29.78 billion.

Total market revenue of $5.3 billion fell 11%, including a 16% drop in fixed-income markets and a 2% drop in equity markets.

“The economy is performing very well despite constraints related to the Omicron variant, inflation and supply chain constraints,” Chief Executive Jamie Dimon said. “Credit remains healthy with exceptionally low net charge-offs, and we remain optimistic on US economic growth as business sentiment is upbeat and consumers benefit from job and wage growth.”

Drilling into the numbers, Jefferies analyst Ken Usdin said JPMorgan’s managed revenue missed estimates on flat mortgage origination volumes.

Usdin said the bank’s 11% drop in trading revenue was a loss of about 10% to the firm’s previous estimate.

With brisk capital markets and M&A activity, the firm’s investment banking fees rose 37% to $3.5 billion.

Usdin said JPMorgan’s credit card fees — $100 million from last quarter — amount to “good news” and that credit card sales volume grew 29% over the year-ago period.

Earlier this week, FLPutnam Investment Management portfolio manager Ellen Hazen said that JPMorgan is one of the firm’s core holdings due to its “very strong” position in investment banking, commercial and consumer banking.

She said she was looking for more signs of credit growth, as well as plans for the bank to invest in technology to compete with fintech rivals.

“Management has already indicated that it is willing to use its strong balance sheet to invest in the business,” Hazen told Businesshala. “Right now, two areas stand out: compensation spending and fintech investing. Note, the latter is likely to be a short-term pain, long-term profit investment. Competing with well-funded fintech companies will cost JPM in the short term, But it will allow it to maintain its dominance among consumers in the long term.”

In terms of loan growth, JPMorgan disclosed some positive numbers on Friday, with an 18% increase driven by securities-based lending. Card loan growth increased 5%.

Wells Fargo’s profit up $2.7 billion

Wells Fargo’s fourth-quarter profit rose to $5.75 billion, or $1.38 per share, from $3.09 billion, or 66 cents per share, in the year-ago quarter. Revenue increased from $18.49 billion to $20.86 billion.

The San Francisco-based banking giant was expected to earn $18.79 billion on revenue of $1.11 per share, according to a FactSet survey of Wall Street analysts.

CEO Charlie Scharf said, “The changes we’ve made at the company and the strong economic growth prospects make us feel good about how we’re entering 2022.” “But we also know that we still have a multi-year effort to meet our regulatory requirements – with the potential to continue along the way – and we continue to work to put exposure related to our historical practices behind us.” keep.”

See Wells Fargo now sees regulatory issues as ‘likely’

Scharf said the bank’s lending activity picked up pace in the second half of 2021, with loans from its consumer and commercial portfolio growing 5% during the latter half of the year.

“We continued to manage credit well and the strong economic environment helped reduce charge-offs to historic lows,” Scharf said.

Citigroup’s earnings fall by nearly $1.1 billion

Citigroup reported fourth-quarter net income of $3.17 billion, or $1.46 per share, up from $4.3 billion, or $1.92 per share, in the year-ago period. Revenue increased from $16.8 billion to $17 billion.

The New York-based bank beat the Wall Street consensus of $1.39 in earnings on revenue of $16.85 billion. Citi said it faced higher expenses, partially offset by higher revenue and lower cost of credit.

The latest quarter also includes a pre-tax impact of approximately $1.2 billion related to the previously announced divestment of its consumer banking businesses in Asia.

Earlier on Friday, the bank said it has agreed to sell its consumer banking franchise United Overseas Bank Ltd U11 in Indonesia, Malaysia, Thailand and Vietnam.
+2.57%,
The deal includes a premium of approximately $690 million paid to Citigroup; As well as payments for the net assets of the acquired businesses.

UOB disclosed $2.98 billion in total net asset value to Citigroup’s consumer business, which includes Citigroup’s retail banking. The deal will affect approximately 5,000 consumer bank and support employees of Citigroup that are targeted to be transferred to UOB.

Earlier this week, Citigroup revealed plans to exit its consumer business in Mexico, but it has yet to name a buyer. The move surprised Wall Street analysts.

as well JPMorgan, Goldman profit updates could shape bank stock rally

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