To paraphrase Charles Dickens, it was the best of banks, it was the “well-let’s-say-that-there’s-room-for improvement” of banks.
We’re talking about JPMorgan and Wells Fargo, of course. The two banks offered a starkly different portrait within the same operating environment — same jobs picture, interest rate environment and same potential customer pool.
We’ll start with Wells, which you may have seen in the news a bit recently, as the beleaguered bank has seen its share of headlines — letters from the CEO, $75 million in compensation clawed back from former executives and even a lawsuit from a bitcoin exchange. Shares in that company were off 3 percent at the end of the day, as the scandals over fake accounts just kept on keeping on.
The results were not worse than expected, and maybe that’s an accolade, of sorts, as profits were roughly flat in the March quarter. The $5.4 billion on the bottom matched the tempered expectations of analysts, translating into $1 a share in earnings (four pennies above the Street).
The mantra here is trust, and CEO Tim Sloan said the firm is looking toward “rebuilding” that trust, where “every day we continue to make progress.” Progress’s hurdle is a low one to clear, as a single month, March, illustrates, with credit card applications down 42 percent year over year.
And yet, could there be the glimpse of a green shoot? There were roughly 23 and a half million primary consumer checking account holders at the end of March. That was up 1.6 percent from last year’s March. Sloan pointed that out as evidence of progress and off lows. Drilling a bit into the numbers, there are signs that other initiatives may be gaining traction, albeit in some cases off muted bases.
Total numbers of digital sessions were up 8 percent year over year in March, and point-of-sale (POS) active consumer credit card accounts were up in the low single digit percentages.
But the loan book continues to suffer, as consumer loans were off $5.7 billion, with outstanding credit card loans off $2 billion sequentially (known as a “linked quarter”), showing the impact of seasonality and a slowdown in account openings, a trend that has persisted through the year.
A bit more granular detail on credit cards: Net charge offs were up 45 basis points, with POS active accounts down 4 percent. Total digital and mobile sessions stood at 498 million, compared to 460 million last year at the same period.
And then there was JPMorgan, where strength seemed to emanate across all business lines. Earnings per share of $1.65 was a full 13 cents better than the Street, where revenues were $26 billion.
As pointed out by Marianne Lake, CFO, highlights for the quarter came from a total average core loan growth that was up 9 percent year over year, which showed “double digit consumer deposit growth.” Card sales, the company said, were up 15 percent, merchant volumes up 11 percent. Auto loans and leases were up 12 percent, and, as Lake noted, “deposit growth continued to outperform the industry, up 11 percent.” Half of that growth came from an existing customer base, and, as is germane to payments, active mobile customers grew by 14 percent.
At the end of the quarter, earnings supplements showed that the active mobile customer base stood at 27.2 million, with total active digital customers at 45.5 million, up 7 percent year over year. All of this occurred while the number of physical branches was down by 3 percent. And through the quarter, revenues from the investment banking division were up 34 percent to $1.7 billion. Allowances for loan losses were flat year over year, the company said in its filings.
While earnings may or may not have been enough to ignite a Trump rally anew for bank stocks (in fact, this was no dynamic duo, with stocks both sinking) — one thing’s for sure. Both firms are likely happy that at least one quarter of what is likely to be a tumultuous year is in the rearview mirror.