:max_bytes(150000):strip_icc()/GettyImages-2240491427-c887ee4eebef455497c7b89a7fa0ade7.jpg "Here’s What We’ve Learned From Big Bank Earnings Reports This Week")
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KEY TAKEAWAYS
- Large U.S. banks surpassed earnings expectations with their third-quarter financial results.
- The major financial institutions enjoyed higher revenues from dealmaking and asset management as the U.S. stock market continued surging.
- Some bank executives cautioned against complacency, though, in an uncertain environment.
Large U.S. banks, reveling in a market-friendly environment, surpassed third-quarter revenue and earnings expectations this week. At the same time, they emphasized that geopolitical uncertainty requires vigilance to ensure the good times last.
With a frothy stock market boosting dealmaking, corporate lending and returns on asset management and trading, banks ranging from JPMorganChase (JPM) to Wells Fargo (WFC) topped consensus projections while expanding profits from the same period a year ago.
In a research report, UBS noted the results from big banks were “not what the bears wanted.” Indeed, most investors praised them, sending shares of the major banks sharply higher in recent sessions.
Why Bank Earnings Are Significant
The financial results of large banks provide important clues on consumer credit trends, the performance of capital markets and the health of the economy overall. Investors are keeping close tabs on banks’ earnings reports and comments from their top executives amid uncertainty about the economic outlook and increased market volatility.
A Dose of Caution
Amid the ongoing federal government shutdown and global trade tension, though, some bank executives cautioned against complacency.
Jamie Dimon, JPMorgan’s CEO, said third-quarter results reflect a resilient U.S. economy. But a murky outlook persists.
“There continues be a heightened degree of uncertainty stemming from complex geopolitical conditions, tariffs and trade uncertainty, elevated asset prices and the risk of sticky inflation,” Dimon said. “As always, we hope for the best, but these complex forces reinforce why we prepare the firm for a wide range of scenarios.”
JPMorgan, the nation’s largest bank, saw its third-quarter earnings rise 12% despite flat net-interest income, even as loans and deposits increased. The company’s investment-banking unit helped drive the profit gain, with its revenue up 14%.
At Goldman Sachs (GS), profits surged 39% as investment-banking fees rose a whopping 42%. Yet the company reportedly plans to move ahead with more than 1,000 layoffs by the end of the year, with CEO David Solomon noting “conditions can change quickly,” requiring strong risk management.
“Longer term, we are prioritizing the need to operate more efficiently,” Solomon said.
Still, Strong Customer Health
At Wells Fargo, net interest income exceeded expectations, and the bank unveiled a higher net interest margin target. Charlie Scharf, the bank’s CEO, said the company’s overall 9% profit gain reflected ongoing momentum across its businesses.
“Spending on debit and credit cards continued to increase, auto loan originations had strong growth from a year ago and total client assets in our wealth and investment management businesses continue to grow,” Scharf said, adding that “the financial health of our clients and customers remains strong.”
Net earnings at Morgan Stanley (MS), meanwhile, soared 45%, driven by record-high, third-quarter revenue. Equity trading revenue and investment-banking revenue grew 35% and 44%, respectively, accounting for about a third of the firm’s business.
