JPMorgan Beats Views, Wells Fargo Falls On Forecast, Citi Swings Higher

Dow Jones giant JPMorgan Chase (JPM) topped earnings and revenue views early Friday as big banks kicked off the Q2 earnings season. Wells Fargo (WFC) fell after net interest income outlook missed views. Citigroup (C) rose on its quarterly beat. JPM stock is trading in a buy zone near record highs while Citi broke out this week.

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Banking Giants Kick Off Earnings Season Next Week

JPMorgan Earnings

JPMorgan (JPM) reported a 29% earnings increase to $6.12 per share, compared to FactSet expectations of $5.88 per share. Excluding certain items, adjusted earnings were $4.40 per share for the quarter.

Revenue jumped 20% to $50.2 billion, well ahead of views of a 2.2% increase. Net interest income rose 4%, but fell short of the 6.5% growth expected by analysts.

JPMorgan increased its provision for credit losses to $3.05 billion, from $1.88 billion in Q1 and the $2.89 billion the bank set aside last year.

The bank guided 2024 net interest income around $91 billion, which was just below FactSet views of $91.1 billion.

JPMorgan topped expectations for Q1 results in April, but JPM stock tumbled after the bank guided net interest income below forecasts and raised its expense outlook.

JPM Stock

JPMorgan eased a fraction early Friday and tested its 10-day moving average.

JPM stock is trading in a buy zone for a six-week flat base after reclaiming a 205.88 buy point at the start of the week.

Shares on July 3 hit a record high 210.38.

JPM stock rallied 22% so far this year through Thursday.

Wells Fargo Earnings

Wells Fargo earnings rose 6.4% to $1.33 per share, ahead of views of a 3.2% increase. Total revenue ticked up slightly to $20.69 billion, while FactSet expected a 1.2% decline.

The bank’s net interest income declined 9% for the quarter, slightly worse than the 7.9% decrease that analysts predicted.

Wells sets aside $1.24 billion in provisions for credit losses, compared to $938 million last quarter and $1.71 billion for the same period last year.

The bank expects 2024 net interest income declines 7% to 9%, but will likely be in the upper half of that range. Wells Fargo also lifted its noninterest expense outlook to $54 billion from around $52.6 billion.

Meanwhile, Wells Fargo is reportedly renegotiating their contract with Bilt Technologies for the Bilt rental rewards credit card. Bilt users earn credit card points by paying for rent with the card, while landlords don’t incur the typical fees for card payments. However, the program is costing Wells Fargo as much as $10 million per month, according to the Wall Street Journal.

WFC stock fell 5.8% premarket Friday. Wells will fall below its 50-day moving average if the early move holds.

Shares are eying a 61.18 buy point for a cup-with-handle base.

Wells Fargo popped 22.2% in 2024.

Citigroup Earnings

Citigroup reported a 14.3% increase in earnings to $1.52 per share, outpacing the 4.5% growth expected by analysts. Total revenue rose 4% to $20.14 billion to beat estimates for a 3.3% increase.

Net interest income was $13.49 billion for the quarter, essentially flat from Q1 but down from $13.9 billion last year.

Citi allocated $2.48 billion in provisions for credit losses, increasing from $2.37 billion last quarter and $1.82 billion last year, respectively.

Citi guided full-year revenues between $80 billion and $81 billion, which was in-line with FactSet views of $80.66 billion. The bank expects net interest income excluding markets to decline modestly year-over-year. FactSet predicts 2024 net interest income declines 1.1% to $54.27 billion.

On Monday, Citi announced it will cease operations in Haiti after more than 50 years of service. Citi plans to voluntarily surrender its banking license once it receives regulatory approval. Citi’s international banking and corresponding banking services will continue for existing clients.

C stock swung 3.5% higher early Friday.

Citi is trading in a buy zone for a six-week flat base. Shares rebounded above the 64.98 buy point on Tuesday.

Citi leapt 27.7% this year.

Banks Boost Dividends After Stress Test

The Federal Reserve on June 28 announced that all 23 major banks passed the stress test and remained above their minimum capital requirements during a hypothetical recession, despite total projected losses of $541 billion. The Fed said that the hypothetical loss rates on office properties for this year’s stress test are roughly triple the levels reached during the 2008 financial crisis.

As usual, a number of banks boosted dividends and buybacks after the annual stress tests. JPMorgan hiked its dividend to $1.25 from $1.15 and authorized a $30 billion stock buyback. Wells Fargo boosted its dividend 14% to 40 cents. Wells alluded to repurchasing more stock over the next year. Citi increased its dividend 3 cents to 56 cents per share and said it will assess repurchases on a quarter-to-quarter basis.

Goldman Sachs (GS), Bank of America (BAC) and Morgan Stanley (MS), which all report early next week, also increased their dividends. In addition, Morgan Stanley announced a $20 billion buyback.

Elsewhere, Jefferies analyst Ken Usdin on July 3 hiked his price target for JPM stock and Wells Fargo. Jefferies is now forecasting five Fed rate cuts of 25 basis points through 2025 and believes this should benefit net interest margins from fixed-rate asset repricing and the roll-off of swaps and hedges. Jefferies added that softer loan growth for banks and higher deposit costs are mainly results of “higher-for-longer” interest rates.

The firm lifted its price target on JPM stock to $239 from $230 and maintained a buy rating on the shares.