Wells, JPMorgan, Citi (Mostly) Impress In Q1 — But Corporate Activity Falls Flat

Top banking rivals JPMorgan Chase, Wells Fargo and Citigroup all posted their earnings on Friday (April 13), and overall, the institutions beat (most) analysts’ estimates. Investors weren’t necessarily convinced by the strong numbers, however, with shares wavering for financial institutions (FIs) after earnings were posted.

It appears the FIs ultimately received a boost from U.S. tax reform, and strong economic growth around the globe is also benefitting these players. Yet corporate customers aren’t driving the success, for the most part. This week’s B2B Data Digest examines the numbers released by the institutions for Q1 2018, highlighting the role corporate and wholesale banking operations did (or did not do) to support an overall impressive quarter.

JPMorgan Chase

Lower corporate tax rates led JPMorgan Chase to post an 8.6 percent decline of income tax expenses, which hit $2.56 billion in the quarter, though the FI still missed some analysts’ estimates for Q1 2018. Revenue declines in its investment banking operations, which also hurt earnings data, led to a nearly 1 percent drop in earnings following the release of the earnings data.

Still, the FI posted a 35 percent increase in profits, posting an all-time-high, according to Reuters reports. Revenues were up 10 percent, hitting $28.5 billion. JPMorgan Chase earned $2.37 per share.

“We are pleased with the firm’s performance this quarter, with all of our businesses showing continued and broad strength and an overall environment that remains supportive,” said Chief Financial Officer Marianne Lake on the FI’s earnings call. She added that higher interest rates and tax cuts are also expected to continue boosting profits.

“The global economy continues to do well, and we remain optimistic about the positive impact of tax reform in the U.S., as business sentiment remains upbeat and consumers benefit from job and wage growth,” said CEO Jamie Dimon in a statement, according to Investors.com.

JPMorgan didn’t see much of a boost from lending operations, which were relatively flat in the quarter, reports said. Rather, credit card and auto lending operations drove the institution’s financial strength in the quarter.

Wells Fargo

Amid threats of a $1 billion fine by the Consumer Financial Protection Bureau for misconduct within its car insurance and mortgage businesses, Wells Fargo noted that it may revise its first-quarter earnings data, released Friday. Until then, however, Wells’ earnings beat analysts’ estimates, a surprising feat considering the damaging scandals the FI has endured in recent months.

Wells posted $21.9 billion in revenue, down from $22.3 billion; profits were up 5.5 percent, however, and the FI posted earnings of $1.12 per share, surpassing expectations, according to CNBC reports.

Wells did not offer exact details on its small business and enterprise operations, instead noting that average consumer and small business banking deposits combined declined $2.1 billion quarter over quarter to $755.5 billion.

Its Wholesale Banking unit, which offers corporate financial services, including business banking and treasury management, saw a 21 percent increase in net income, hitting $2.9 billion in the quarter, while revenue decreased 2 percent quarter over quarter.

Citigroup

Citigroup also beat analysts’ expectations this quarter, posting $1.68 earnings per share and revenue of $18.87 billion in revenue for the quarter. Its consumer banking revenue jumped 7 percent, and reports in The Wall Street Journal also pointed to lower taxes as a boost to Citi’s earnings.

The FI posted its strongest profit since 2015, reports said.

Unlike JPMorgan, however, Citigroup saw a clear boost from strengthened corporate borrowing and other financial services activity. Its treasury and trade solutions operations saw an 8 percent year-over-year increase in revenue, while corporate lending jumped 19 percent to $521 million.

Reports in Reuters noted that growth isn’t entirely riding on the backs of corporate customers, however, with consumer banking revenues also proving strong, while equity markets revenue increased by 38 percent as Citi benefited from heightened volatility, the publication said.