One-Time Charges Concealed How Well Big Banks Did During The Last Quarter Of 2023

The week ended with earnings reports from four biggest U.S. banks. JPMorgan Chase & Co JPM, Wells Fargo & Company WFC, Bank of America Corporation BAC and Citigroup Inc C delivered disappointing news as one-off charges melted their income but also revealed the surprising resilience of the U.S. economy during 2023.

Bank Of America Profit Fell Due To One-Off Charges

The second largest U.S. lender reported its profit dropped with its results coming short of analysts' expectations. For the quarter ended on December 31st, Bank of America reported net income of $3.1 billion, or 35 cents a share, down from last year’s comparable quarter when it earned $7.1 billion, or 85 cents a share. Excluding two charges related to replenishing a fund for bank failures and how it indexed some trades, adjusted profit amounted to 70 cents, slightly topping LSEG’s estimate of 68 cents. The impact of interest rate headwinds was only partially offset by strong organic growth and good cost management with the Bank of America reporting modest fourth quarter results. With a windfall year, net interest income fell 5% to $13.9 billion.

Wells Fargo Observed A Rise In Credit Loss Provisions And Warned Of A Net Interest Income Drop

Wells Fargo shares went down 3.1% upon its guidance of 2024 net interest dropping from 7% to 9% compared to 2023. For the fourth quarter, Wells Fargo also reported a higher provision for credit losses that amounted to $1.28 billion, rising from $957 million it reported for last year’s comparable quarter due to higher allowances for credit losses on credit cards and commercial real estate loans.  Wells Fargo has seen a modest deterioration in creditbut its new credit card products fueled consumer spending above the industry average, which has helped the bankimprove its market share. The corporate and investment banking segment did particularly well, as revenue rose 26% YoY to $4.74 billion.

Net interest income amounted to $12.77 billion, topping Wall Street expectations of $12.76 billion. Fourth-quarter earnings amounted to 86 cents a share, in line with Wall Street estimates with revenue of $20.49 billion topping expectations of $20.3 billion.    

But although it remains confident that stronger returns are on the horizon, Wells Fargo business performance remains sensitive to interest rates and the health of the U.S. economy.

JPMorgan Chase Reported Its Best Ever Annual Profit

JPMorgan posted a 19% net income rise to a record $24.2 billion and forecasted a higher-than-expected interest income for 2024. Fourth quarter earnings per share amounted to $3.04 on the back of revenue of $38.6 billion that came below estimates, with shares dipping 0.1% and wiping off early gains.

Citigroup Reported Its Worst Quarter In 14 Years

Due to one-time charges that dragged its income by as much as $4 billion, Citigroup reported a net loss of $1.8 billion. Citigroup also announced plans for 20,000 job cuts which is about 10% of its workforce.  Although the cuts could cost as much as $1.8 billion, they could result in $2.5 billion of annual savings by 2026. Although 2023 performance was disappointing, Citigroup CEO Jane Fraser believes 2024 will be a turning point as the bank had made substantial progress in simplifying its organization and executing its restructuring strategy.

All in all, that these mixed reports have in common is that one-charges obscured how well JPMorgan Chase, Citigroup, Wells Fargo, and Bank of America performed during the last quarter of 2023.

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