JPMorgan Leads Big Banks In Earnings Season Kickoff, With Investment Banking Fees and Investor Appetite Taking Center Stage
Talk is cheap, but this season’s bank earnings are anything but — delivering figures that investors can’t seem to get enough of. After being teased with modest downgrades and poor-sounding investor notes, Wall Street has been eager to see how financial institutions performed this quarter — and hear their outlooks for the industry, consumers, and the economy.
Banks are back: On Friday, three of America’s financial titans read out the first cropping of bank profits — marking the unofficial start of earnings season. In the third quarter, JPMorgan ($JPM), Wells Fargo, and BlackRock ($BLK) generated beefier income from investment banking activities — and mostly delivered despite concerns about lofty expectations, rising credit delinquencies, and anticipated declines in net interest income (NII).
- JPMorgan and Wells Fargo saw investment banking fees rise by 31% and 37%, respectively. However, their NII diverged, with seeing a 3% increase while dropped 11%.
- Meanwhile, BlackRock reported record inflows of $221B, boosting its total assets under management to $11.5T, significantly contributing to fee-based revenue.
Bank for your Buck
Initial results have provided some optimism, with the Financial Select Sector SPDR Fund rising 2% on Friday — setting the stage for other major banks, like Goldman Sachs, Morgan Stanley, and Bank of America, set to report this week. However, while past results are important, investors are just as focused on what banking leaders expect for the future.
- As interest rates decline, many financial giants could report weaker revenues and profits, but those with large unrealized losses from real estate and low-yield bonds could benefit.
- Analysts will also be on the lookout for metrics like asset inflows, investment banking fees, and borrowing activity — factors that might offset higher interest rates and lower NII.
Signs of stress: Investors are also looking for insights into the state of the consumer and economy, which could have a bigger impact on earnings as the season progresses. Wells Fargo CEO Charlie Scharf noted “pronounced stress” among its lower-income consumers but said overall consumer health remained steady in the third quarter. JPMorgan’s Jamie Dimon took a broader view, declaring that the economy had finally achieved a soft landing — but warned of “treacherous” geopolitical tensions that appear to be “getting worse.”
