Banking

Banks’ First Quarter Results Show Double-Digit Gains In Digital Banking Users

Amid earnings results Friday, JPMorgan Chase, Citigroup and Wells Fargo showed traction in mobile and online banking activity, with double-digit percentage growth seen in some cases, measured year over year.

The headline numbers showed earnings beats for each of the banking heavy hitters.

JPMorgan Chase

For JPMorgan, the quarter showed net income of $2.37 a share, better than the Street at $2.28. Overall revenues were up 10 percent to $28.5 billion, besting estimates by about $860 million.

Supplemental materials released by the company showed that active digital customers stood at 47.9 million, up from 46.7 million in the same period last year. During the conference call with analysts, and in response to questions, CFO Marianne Lake stated that the growth is “structural” as consumers continue to embrace the digital and mobile channels.

That shift, she noted, comes as the banking giant continues to add features that make it compelling for customers to move money through technological means.

Notably, the number of branches stood at just over 5,100 in the latest quarter, compared to 5,217 last year — perhaps adding some torque to those digital efforts.

For JPMorgan, active mobile customers stood at 30.9 million, compared to 30 million at the end of the year and 27.3 million in the first quarter of last year.  Lake said during the call that the addition of digital account opening has been likely a driver of digital banking — and relationships are proving fruitful.

“We see more card spend — both debit and credit,” said Lake of digital consumers. “But we also see higher deposits and investment…So, overall, it’s really good for our franchise to have these customers engaged — and we hope they also use our branches, by the way.”

During the conference call with analysts, Lake also stated that “deposits grew solidly at 6 percent year-on-year. We believe we continue to outpace the industry which, as we previously noted, is experiencing a slowdown as consumers are increasing their allocations to investments — but also, based upon our data, they appear to be spending more, reflecting a continued high level of confidence.”

Fee income growth is expected to be about seven percent this year, with Lake noting that the company has lapped Sapphire reserves taken in the past, and acquisition costs are lower, which amounts to a tailwind.

Citigroup

In results reported on Friday (April 13), the top line at Citigroup came in at $18.9 billion, in line with estimates and showing growth from the $18.3 billion reported last year.

On a profit level, the company said it earned $1.68, which bested the $1.61 that had been expected by the Street. Total loans surged 7 percent year over year to $673 billion.

The average of loans on cards stood at $159 billion, up from $152 billion.

Digital efforts in North America showed traction. Citigroup noted that active digital customers were at 18 million, up 13 percent year over year. Mobile customers tallied 10 million, up 25 percent year over year.

Similarly, the international stage saw growth across mobile conduits. The total number of active digital customers stood at 7 million and gained 14 percent year over year.

The total number of active mobile customers surged 36 percent to 4 million over the same period.

During the call, as well, CEO Michael Corbat said that roughly a third of new customer acquisitions are coming to the company through digital channels.

CFO John Gerspach said, “Our recently announced launch of national digital banking is key to this next step in our transformation, designed to meet all the clients’ needs through mobile banking, including the ability to seamlessly open a new Citibank retail account within the mobile app.

“We believe these capabilities will allow us to expand beyond our core markets and build a national presence, but we recognize that this build-out will take time. New features will begin to roll out towards the end of the second quarter, followed by a promotional campaign beginning in the third quarter.”

Gerspach said of branded cards that “client engagement remained strong, with average loans growing by 5 percent and purchase sales up 8 percent year over year.”

Within the credit business, said the CFO, credit “continued to be broadly favorable this quarter.” Management stated that net credit losses were up nine percent year on year, with NCLs in North America at 304 basis points, in line with guidance.

Wells Fargo

As noted Friday, Wells’ results were preliminary, showing EPS of $1.12 vs. expectations of $1.06. But the possibility of a $1 billion penalty looms tied to mortgage fees and car insurance – so earnings may change.  Revenues were $21.9 billion, better than the $21.7 billion that had been estimated.

CEO Timothy Sloan said on the conference call with analysts, in a recounting of digital efforts, that in the first quarter “we rolled out our digital mortgage application, which combines the power of Wells Fargo’s data with a You Know Me customer experience. In many cases homebuyers are now able to receive pre-approved loan decisions immediately, either online or through their mobile device. In March, 10 percent of completed retail applications were through our digital mortgage applications.”

Sloan said later during the call that “our customers are increasingly using our digital channels and digital sessions, and they increased 13 percent from a year ago, while teller and ATM transactions declined 4 percent.”

The company closed 58 branches in the first quarter and is on track to close approximately 300 branches this year, management said.

The $1 billion penalty would dwarf the $185 million paid previously in connection with sales practices where sham accounts were opened. The estimated tally now stands at 3.5 million fake accounts, up from 2.1 million.

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