Goldman Sachs beat profit forecasts by 30% on Tuesday as its stock-trading revenue jumped 72%. JPMorgan Chase, the largest US bank, missed on both profit and revenue.
Bank results act as an early health check on the economy. This batch landed with bond yields near a 24-year high, a month after the Federal Reserve raised rates for the first time since 2023.
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Big Banks Earning Recap
Goldman earned $17.01 per share, well above the $13.09 analysts expected. Net revenue rose 23% to $18.68 billion, according to its filing.
Its equities desk, which trades stocks for hedge funds and other large clients, brought in $6.44 billion. Bond trading was flat.
JPMorgans results, meanwhile, told a different story. Excluding a $658 million securities loss, it earned $5.75 per share, short of the $5.92 Bloomberg consensus.
Its fixed-income desk, which trades bonds, currencies, and commodities, saw revenue fall 4% to $5.4 billion. Shares slid about 3% before the opening bell, Reuters reported.
Wells Fargo earned $1.87 per share, edging past estimates. However, revenue of $21.87 billion missed forecasts by 2.1%, StockStory data show.
Its net interest income, the gap between what it earns on loans and pays on deposits, also fell short at $12.52 billion.
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Citigroup, the last of the four to report, beat forecasts. It earned $2.85 per share, above the $2.65 analysts expected, Investing.com data show. Revenue rose 8% to $23.8 billion, its best third quarter in a decade, according to its release.
Its stock-trading revenue rose 14% on prime brokerage, where client balances grew more than 40%. Bond trading revenue rose 4%.
Bank earnings chart comparing Citi, Goldman, JPMorgan and Wells Fargo results vs estimates, Source: BeInCryptoWhat Do Bank Earnings Mean for the Stock Market？
BeInCryptos big bank earnings preview noted that one miss could be shrugged off, while a pattern of misses would weigh on the market. Tuesday brought two beats and two misses.
However, bank earnings do not do much for the stock market as a whole this season. FactSet expects banks profits to grow about 3%, against 29.6% for the S&P 500, so the rally rests on tech and energy, not lenders.
The bar for banks is low: FactSet sees Q3 EPS growth of just 3.0% for Financials vs 29.6% for the S&P 500, and the sector trades at 14.3x forward.
JPMorgan's Q3 EPS estimate rose to $5.93 from $5.49 since June 30 (FactSet, Oct 9).
That explains why index futures barely moved after the Goldman and Citigroup beats and the JPMorgan and Wells Fargo misses. The results did not break the rally, but they didnt spread it beyond tech either, which is what bulls were hoping for.
S&P 500 (SPX) Performance. Source: TradingView
The more useful signal is in how the banks made their money.
- Stock trading boomed
- Goldman lent a record amount to hedge funds, and
- Borrowed bets on stocks are piling up.
Meanwhile, bond trading slipped at JPMorgan, JPMorgan booked a $658 million securities loss, and Wells Fargos lending income missed despite strong loan growth, all signs that higher rates are starting to bite.
JPMorgan CEO Jamie Dimon flagged the pressures building under a still-growing economy.
“…large fiscal deficits, sticky inflation, elevated asset prices, rising interest rates and geopolitical conditions continue to shift under the surface,” he said.
Based on these warnings, Wednesdays inflation report now matters more for stocks than these bank results did.