Bank Earnings Roundup: Impressive Trading Revenues, Rising Loan Losses

Second-quarter earnings season got into full gear on Tuesday with big bank reports from JPMorgan Chase & Co. JPM, Citigroup Inc C and Wells Fargo & Co WFC. The earnings reports and initial reactions were mixed.

Here’s what investors should know.

JPMorgan Reports Record Trading Revenue: JPMorgan reported adjusted EPS of $1.38 on revenue of $33 billion. Both numbers exceeded consensus analyst estimates of $1.04 and $30.3 billion, respectively. The earnings beat was driven in large part by a record $9.7 billion in trading revenue, up 79% from a year ago. Bond trading was particularly strong, with revenue up 120% to $7.3 billion.

The bank also set aside $8.9 billion for anticipated loan losses.

“Despite some recent positive macroeconomic data and significant, decisive government action, we still face much uncertainty regarding the future path of the economy,” CEO Jamie Dimon said.

JPMorgan shares traded higher by 1.4% on Tuesday morning.

Citigroup Reports Earnings, Revenue Beats: Citigroup reported adjusted EPS of 50 cents on $19.77 billion in revenue. Both numbers exceeded analyst expectations of 28 cents and $19.12 billion, respectively. Revenue was up 5% from a year ago.

Citi reported $5.6 billion in fixed income, currency and commodities trading revenue, exceeding analyst estimates of $4.86 billion. Fixed income trading revenue was up 68% from a year ago, while equity trading revenue was down 5% to $770 million.

Global consumer banking was a soft spot for Citigroup. Revenue in the division was down 10% to $7.34 billion. Credit losses were up 12% to $2.2 billion.

“While credit costs weighed down our net income, our overall business performance was strong during the quarter, and we have been able to navigate the COVID-19 pandemic reasonably well,” CEO Michael Corbat said.

Citigroup shares were lower by 1%.

Wells Fargo Slashes Dividend: Wells Fargo’s struggles continued when the company reported an adjusted EPS loss of 66 cents on revenue of $17.8 billion in the second quarter. Both numbers missed consensus analyst estimates of a 20-cent loss on revenue of $18.4 billion.

Revenue was down 17.5% from a year ago.

As a result of new dividend restrictions by the Federal Reserve tied to profitability, Wells Fargo was forced to issue a deep cut to its dividend, dripping its quarterly payout from 51 cents per share to just 10 cents.

Wells Fargo also set aside $8.4 billion in loan loss reserves. The company’s $2.4 billion net loss on the quarter was its first quarterly loss since the financial crisis.

“We are extremely disappointed in both our second quarter results and our intent to reduce our dividend,” CEO Charlie Scharf said.

Wells Fargo shares traded lower by 5.3%.

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