Three leading US banks—Wells Fargo, Citigroup, and JPMorgan Chase—kicked off the latest earnings season for the sector, signaling that the worst of the March banking turmoil may be behind them. Each reported different quarterly results. Wells Fargo and JPMorgan Chase posted profits of 4,938 million dollars and 14,472 million dollars respectively, up 57 percent and 67 percent year over year from April through June. The gains were driven by higher interest rates, and for JPMorgan, the boost also came from the acquisition of First Republic. Citigroup, by contrast, saw a 36 percent decline in the quarter. Revenue slipped 1 percent to 19,436 million dollars, with corporate banking revenue down 9 percent to 10,441 million dollars as a key segment of the overall revenue mix.
Analysts had warned that Citigroup could post softer results, with expectations signaling a year over year drop of more than 30 percent. The main reason cited was narrower profits from trading and debt instrument negotiations, according to a market briefing from the XTB brokerage. Higher interest rates have supported the banking sector by lifting income in many respects, but margins remain under pressure as competition for deposits intensifies, especially in the US market. Caution is advised about potential net deposit outflows and slower lending, particularly among regional banks.
JPMorgan Chase, the largest US bank by assets, reported a net income of 41.307 billion dollars for the quarter, up roughly 34.5 percent from the second quarter of 2022. The company also raised its full-year outlook for net interest income to about 87,000 million dollars, lifting the prior projection of around 81,000 million.
Jamie Dimon, the chair and CEO of JPMorgan Chase, described it as another quarter of solid results. He noted growth across all business lines and affirmed that the US economy remains resilient with healthy consumer balance sheets and ongoing consumer spending, albeit at a slower pace. Dimon highlighted continued employment strength while pointing to risks ahead, including the gradual depletion of cash reserves by consumers, persistently high core inflation, large fiscal deficits, and the ongoing war in Ukraine.
Citigroup, while reporting mixed results, offered an optimistic view of its performance. CEO Jane Fraser emphasized the strength of Citi’s diversified model and solid client relationships, especially in a challenging macro environment.
Wells Fargo posted revenue of 20,533 million dollars for the quarter, up about 20.5 percent from a year earlier. This growth came alongside a 29.1 percent increase in net interest income, reaching 11,722 million dollars in the translated figure, though the bank faced an impairment related to credit risk of about 1,713 million dollars. Wells Fargo’s chief executive Charlie Scharf attributed the strong second quarter to robust net interest income driven by higher rates and ongoing cost controls.
Overcome the March bank scare
The banking crisis that flared in the first quarter, sparked by the collapses of Silicon Valley Bank, Signature Bank, and Silvergate Bank, appears to have cooled. Regulators may nonetheless require more banks to meet higher capital standards under Federal Reserve guidelines. Banks could be asked to hold more capital to satisfy risk-based rules, a move that could constrain profitability in the near term. While regulators intend to strengthen the system, analysts warn it may weigh on financial metrics initially. In the long run, these measures are expected to build a more resilient financial system, reduce risk, and support sustainable growth, including in the European Union context.