Market News & Analysis


Top Story

JPM Stands Out Among Big Banks’ Earnings Reports

Yesterday, my colleague Ken Odeluga highlighted that falling interest rates (and the associated drop in lending revenues) would be a major theme as big US banks reported this quarter’s earnings.

Today, those fears were borne out in the reports of Goldman Sachs and Wells Fargo, though JP Morgan and Citigroup were able to navigate the headwinds successfully:

  • Goldman Sachs reported EPS of $4.79, below estimates of $4.86, as the company works to transition away from proprietary trading to a more traditional retail bank.
  • Wells Fargo also missed estimates at $1.07 in EPS vs. $1.14 expected in the first report after naming Charles Scharf as its new CEO. In a clear example of negative impact of falling interest rates, the consumer-focused bank reported worse-than-anticipated Net Interest Income despite 2% growth in total loans.
  • JP Morgan beat estimates, reporting $2.68 in EPS vs. $2.46 eyed. The company also beat revenue estimates on the back of decent results from its investment banking division.
  • Citigroup narrowly outperformed analysts’ expectations, with $1.97 in EPS vs. $19.5 eyed. Solid trading revenue figures helped the firm beat headline revenue expectations as well.

For traders anticipating the worst, this morning’s bank earnings onslaught was not as bad as feared. At the open, major indices are edging higher and the big banks are trading roughly in line with their earnings results:

  • Goldman Sachs (GS) is trading down more than -3%.
  • Wells Fargo (WFC) is dipping less than -1%
  • JP Morgan (JPM) is tacking on nearly 2%.
  • Citigroup (C) is essentially flat.


Looking ahead, the Federal Reserve appears likely to cut interest rates further this quarter, with futures traders pricing in an 80% chance of at least one interest rate cut by the end of the year and about a 25% probability of two cuts according to the CME’s FedWatch tool. If interest rates more broadly continue to trend lower, Wells Fargo’s large mortgage business could be a casuality.

Market volatility will also play a key role in the banks’ trading revenue; with geopolitical tensions on the rise, Brexit looming, and lingering concerns about the state of play between the US and China, a spike in volatility could benefit banks in Q4.

In addition to falling interest rates and market volatility, one key factor to watch moving forward will be buybacks. According to Barclays, large banks have reduced their outstanding shares by 2% over the last quarter, and after the Fed approved a record $173B in buybacks and dividends for the banks, this may be just the tip of the proverbial buyback iceberg. Citigroup alone reduced its share count by 11% over the past year!

While the broader economy may prefer banks to grow revenues through more traditional means, big banks’ investors will no doubt benefit from the firms returning capital to their shareholders.



From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.