Big Banks Smash Earnings Expectations But Rally Fails To Produce New Fuel

The second-quarter earnings season for banks kicked off with blowout numbers from the biggest names on Wall Street, but investors weren't in the mood to celebrate.

Despite a string of upside surprises in profit and trading performance, investors focused sharply on guidance and margin pressure, sending several top bank stocks lower.

The Financial Select Sector SPDR Fund XLF, which tracks major U.S. banks, slid 1.1% by 10:15 a.m. in New York.

JPMorgan: Strong Results, But Higher Costs Hit Sentiment

JPMorgan Chase & Co. JPM kicked off earnings season with second-quarter earnings per share of $5.24, blowing past the $4.47 consensus estimate by 17%.

Revenues also came in strong at $45.68 billion, versus the expected $44.05 billion.

The standout driver: investment banking and trading, where equities and FICC (fixed income, currencies and commodities) revenues beat forecasts by $50 million and $470 million, respectively.

Despite a modest miss on net interest income (NII)—$23.31 billion vs. $23.59 billion expected—the bank lifted its full-year NII forecast to $95.5 billion from $94.5 billion.

Return on equity jumped to 18%, well above the 15.1% estimate, and loan growth surged past expectations with $1.41 trillion in total loans.

"JPM delivered on strong fees and raised guidance, even as core NII came in light," Goldman Sachs analyst Richard Ramsden said in a client note, adding that the bank's 20.6% return on tangible equity was 360 basis points above its long-term guidance.

Yet, shares slipped 1.1% as investors zeroed in on higher expense projections and softening net interest margins.

Citigroup: Clean Beat Drives Record High

Citigroup Inc. C posted one of its strongest quarters in years, with EPS of $1.96 versus the $1.60 consensus. Revenue rose to $21.67 billion, topping estimates thanks to a robust trading environment. FICC revenue hit $4.27 billion, nearly 9% above expectations, while equities trading delivered $1.61 billion.

Trading was a bright spot: FICC sales and trading revenue came in at $4.27 billion, beating expectations by nearly 9%, while equities revenue rose to $1.61 billion. Net interest income also surprised on the upside at $15.18 billion, compared to the $14.05 billion forecast.

Citi now expects full-year adjusted revenue to be near $84 billion, reaffirming the upper end of its previous guidance. The strong report supports recent bullish analyst calls highlighting Citigroup as a top money center bank pick for the remainder of the year.

The market responded positively, with Citigroup shares rising 1% to set a new record high.

Wells Fargo: Guidance Cut Overshadows Earnings Beat

Wells Fargo & Co. WFC also beat expectations with second-quarter EPS of $1.60 versus the $1.41 estimate. Revenues landed at $20.82 billion, essentially in line.

Yet, management trimmed its 2025 net interest income guidance to $47.7 billion, now expected to be flat year over year, citing lower market-related income. That modest disappointment was softened by solid fee income growth and stronger-than-expected loan performance.

"Wells delivered a mixed bag," Ramsden said, noting that while core EPS was slightly below Goldman estimates, loan growth and capital markets fees were encouraging.

Wells Fargo stock declined 4.7% on the news, making it the worst-performing large-cap bank on Tuesday.

BlackRock: Record AUM Fails To Impress Investors

BlackRock Inc. BLK posted adjusted EPS of $12.05, easily beating the $10.87 estimate. While net inflows came in light at $67.74 billion—well below the $84.72 billion forecast—the firm's assets under management rose to $12.53 trillion, driven by strong equity flows and favorable market performance.

Base fee revenue hit $4.45 billion, marginally above estimates, and the asset manager enters the second half of 2025 with a stronger fee base thanks to the closing of its HPS acquisition.

Despite the record AUM, BlackRock shares plunged 6.5%, as softer flows and rising expenses overshadowed the earnings beat.

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