JPMorgan Chase & Co kicked off bank earnings yesterday by beating Wall Street estimates for quarterly profit by a wide margin, a signal that the US consumer remains strong, executives at the largest US bank said.
“It does look like geopolitics, particularly around China and trade, are reducing business confidence,” chief executive Jamie Dimon told reporters on a conference call, adding that current consumer financial strength is “very powerful.”
“The consumer is not under strain. The consumer is doing fine,” Dimon said.
He said that although job growth has slowed slightly, “it is still positive and it may very well not go negative.”
The only business to report a fall in revenue was commercial banking, where lower interest rates hampered results.
Overall, revenue rose 8% to $30.06bn, well above the average analyst estimate of $28.49bn, on the back of better-than-expected results in the bank’s bond trading business, where revenue surged 25%.
Strength in bond trading helped offset weakness in equity trading, which it blamed on lower derivatives trading and M&A advisory fees.
The bank’s net income for the quarter ended September 30 was $9.08bn, or $2.68 per share, compared with $8.38bn, or $2.34 per share, a year ago.
Analysts, on average, had expected the bank to earn $2.45 per share, according to Refinitiv data.
Goldman Sachs Group Inc missed Wall Street estimates for quarterly profit yesterday as global economic worries dampened appetite for deals, while it faced up to losses on its own high-profile investments in Uber Technologies and WeWork.
At the bank’s investing and lending division, which will have to wear the collapse in the value of WeWork owner The We Company as well as in other major market launches this year, net revenue fell 40% from last year to $662mn.
Analysts had estimated that Goldman would book a loss of over $250mn from its stake in WeWork in the third quarter.
Goldman executives yesterday declined to comment on its stake in the office-sharing startup.
The only bright spot for Goldman was its institutional client services business, which accounts for nearly a third of its overall revenue, but a 6% growth at the unit was not enough to offset weakness in its other major businesses.
Bond trading revenue was up 8%, while equities rose 5%.
Under chief executive officer David Solomon, Goldman has undertaken a major shift in strategy from its focus on trading to building a bigger consumer business in a bid to shield its revenue from wild swings in financial markets.
Goldman, which recently launched a credit card with Apple, has also attempted to build out new businesses, but top executives at the bank have warned in previous quarters that those efforts will take time to bear fruit.
Solomon has pushed his top lieutenants to bring in at least $5bn of new revenue from those businesses by 2020.
The bank’s net earnings applicable to common shareholders fell 27% to $1.79bn in the quarter ended September 30 from $2.45bn a year ago.
Earnings per share fell to $4.79 from $6.28 a year earlier.
Total net revenue fell 6% to $8.32bn.
Analysts on average had expected earnings of $4.81 per share and revenue of $8.31bn, according to the IBES estimate from Refinitiv.
Expectations from most brokerages tracking the investment bank were generally muted as macroeconomic conditions have been weighing on investor sentiment.
Wells Fargo & Co reported a 26% slump in quarterly profit yesterday, as mortgage income sank and it braced for additional legal expenses tied to a sales practices scandal that erupted more than three years ago.
The bank is operating under heavy regulatory scrutiny, including an unprecedented cap on its balance sheet by the Federal Reserve, as it tries to rebuild its reputation after revealing in 2016 that it had opened potentially millions of unauthorised accounts.
The bank has paid billions of dollars in fines and penalties and launched a campaign to win back the faith of its customers and investors.
It said yesterday it had set aside $1.6bn for legal expenses related to the retail sales practices.
The San Francisco-based lender last month appointed Charles Scharf, a one-time Jamie Dimon protégé known on Wall Street as a detail-oriented number cruncher who excels in streamlining operations, as its new top boss.
The lender’s net interest income fell 7.5% to $11.63bn as the US central bank lowered borrowing costs for consumers twice in the quarter to sustain the more than decade-long economic expansion.
Mortgage income fell 45%, even as US refinancing activity more than doubled from a year ago, according to data released by the Mortgage Bankers Association last week.
Provision for credit losses rose 20% to $695mn in the third quarter from a year earlier.
Net income applicable to common stock fell to $4.04bn, or 92 cents per share, in the third quarter ended September 30, from $5.45bn, or $1.13 per share, a year earlier.
Excluding items, the lender earned $1.07 per share, compared to analysts expectations of $1.15, according to IBES data from Refinitiv.
BlackRock Inc, the world’s largest asset manager, exceeded analysts’ estimates for quarterly profit yesterday, as investors poured money into its fixed-income funds and cash management business amid worries about global growth.
The company attracted $84.25bn in new money during the third quarter, boosting its total assets managed to $6.96tn.
Investors preferred BlackRock’s low-fee passive-investment products over its actively managed funds.
BlackRock’s cash management business drew net inflows of $32bn in the third quarter, taking total assets for this business to $510bn.
“Whether there is risk-on trade in a quarter or risk-off trade in a quarter, we seem to be winning more share of wallet,” chief executive Larry Fink said in an interview with Reuters.
For the quarter ended September 30, net income fell to $7.15 per share, down from $7.54 per share a year earlier, but topped analysts’ expectation for $6.96 per share, according to IBES data from Refinitiv.
Lower-than-expected expenses helped BlackRock beat estimates, analysts said.
Revenue rose by 3% to $3.69bn, driven by higher base fees and technology services revenue, offset in part by lower performance fees, the company said.
BlackRock, which is trying to become a bigger provider of technology used by Wall Street firms to combat competitive pricing pressures in the asset management business, grew technology unit revenue by 30% to $259mn.
British housebuilder Bellway Plc reported higher annual pretax yesterday as the government’s help-to-buy scheme and low interest rates boosted demand for its affordable homes in a tough real estate market.
The company has been benefiting from new house varieties it launched last year and is developing a new construction specification that will help rationalise the number of suppliers it uses.
Newcastle-based Bellway said its recently launched Artisan collection house type was progressing in line with expectations.
The equity loan scheme, originally introduced as a short-term measure that makes it easier for first-time buyers to afford a home, has been criticised for potentially overcharging buyers and the poor quality of its homes.
As the UK looks to exit the European Union, Bellway said it had been in close contact with its supply chain partners over last year to reduce any risks to its business.
The company, which builds everything from one-bedroom apartments to six-bedroom family homes and luxury penthouses, said profit rose 3.4% to 662.6mn pounds ($836.07mn)for the year ended July 31.
The FTSE 250 housebuilder reported a forward order book of 4,878 homes, compared with 4,841 homes in 2018, while the average selling price of homes rose to 291,968 pounds from 284,937 pounds.
British engineering group Renishaw Plc said yesterday its first-quarter profit plummeted 85%, dented by a slump in demand for its precision measurement equipment and ongoing global trade disputes, sending shares 11% lower.
Statutory profit before tax for the three months ended September 30 came in at 5.1mn pounds ($6.47mn) compared with 33.5mn pounds a year ago, the company said, with revenue diving nearly 19% in its biggest unit — metrology.
In May, Renishaw had cut its annual profit forecast for the second time in less than two months as customer demand remained weak.
The engineering firm had also cited weak sales in Asia and soft demand from consumer electronics makers.
First-quarter sales were lifted by large orders from end-user manufacturers of consumer electronic products in the Asia Pacific region, the company said, adding that sales failed to get a similar boost this time around.
The company also experienced reduced demand for its products as a result of the challenging global macroeconomic environment.
Renishaw, which has a market capitalisation of 2.6bn pounds ($3.29bn), makes precision measurement equipment used in products ranging from jet engines and smartphones to medical equipment and satellites through its metrology business.
“Trading conditions are expected to remain challenging through the remainder of this financial year driven by the global macroeconomic environment,” the company said.
Citigroup Inc beat analysts’ estimates for quarterly revenue and profit yesterday, as growth in its consumer banking business tempered weakness in trading.
Citi, the most global of the US banks, said revenue in its consumer unit rose 4% excluding the impact of currency fluctuations, outpacing its institutional clients business where revenue grew 3%.
Consumer business was padded by more US credit card customers beginning to pay interest as promotional periods wore off.
North America branded card revenue jumped 11% in the third quarter.
Expenses in the consumer business fell 2%.
Trading revenue fell 1% as a decline in equities offset stable revenue in fixed-income trading.
The third-largest US bank by assets hit a return on tangible common equity (ROTCE) of 12.2%, above the goal of 12% it has promised investors for the year.
ROTCE is a widely watched measure of how well a bank uses shareholder money to generate profits.
Citi has been focused on building credibility with investors after missing targets in recent years.
Estimates often hovered below the bank’s stated goals, indicating Wall Street analysts were skeptical management could reach the targets it had set.
Net income applicable to the bank rose 6% to $4.9bn, or $2.07 per share, in the third quarter from $4.6bn, or $1.73 per share, a year earlier.
Excluding a tax benefit, the bank earned $1.97 per share. Revenue was up about 1% at $18.57bn.
Analysts were expecting a profit of $1.95 per share and revenue of $18.5bn, according to IBES data from Refinitiv.
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