Bank Earnings:Historical Results/2023 Q1

Return to: Earnings Insight: 2023 Q1 | Earnings Season

Things to be checked:

• The key thing to watch for is Loan loss reserves. It gives insights about the health of consumers and overall economy.
• Bank deposits(individual bank break downs). Analysts project that customers pulled almost $100bn from big banks this quarter. Is that true?
• Credit card balances give insight about the health of consumers.
• Commentaries from banking heads on the state of the economy will be crucial. Jamie Dimon is an interesing one to listen to.
• Investment banking performance shows the state of deal-making, debt and equity underwriting.
• Net interest margin.

Results

Bank	Key Items	Estimate	Actual	Remarks from bank heads
JP Morgan	Revenue	$36.19 billion	$39.34 billion	“The U.S. economy continues to be on generally healthy footings —consumers are still spending and have strong balance sheets, and businesses are in good shape. However, the storm clouds that we have been monitoring for the past year remain on the horizon, and the banking industry turmoil adds to these risks. The banking situation is distinct from 2008 as it has involved far fewer financial players and fewer issues that need to be resolved, but financial conditions will likely tighten as lenders become more conservative, and we do not know if this will slow consumer spending. We also continue to monitor for potentially higher inflation for longer (and thus higher interest rates), the inflationary impact of continued fiscal stimulus, the unprecedented quantitative tightening, and geopolitical tensions including relations with China and the unpredictable war in Ukraine. While we hope these clouds will dissipate, the Firm is prepared for a broad range of outcomes, and we are confident that we can serve the needs of our customers and clients in all environments.” CEO Jamie Dimon said.
	Adjusted earnings	$3.41 per share	$4.32 per share
	Provision for credit losses	$2.27 billion	$2.275 billion(+56% Y/Y and -0.57% Q/Q)
	Bad Card Loans		$922 million(+82% Y/Y)
	30-day delinquency rate on card loans		1.68%(Q1 2022:1.08%)	“I wouldn’t use the word credit crunch,” CEO Jamie Dimon said during the earnings call. “Obviously, there’s going to be a little bit of tightening and most of that will be around certain real estate things.” He added
	Average deposits		-8%(but up 1.7% Q/Q)
	Combined debit and credit card sales		+10% Y/Y
	Average loans		+6% Y/Y
	Net interest income		+49% Y/Y
	Managed net interest income	$19.12 billion	$20.83 billion
Citi Group	Revenue	$19.99 billion	$21.45 billion
	Adjusted earnings	$1.66 per share	$1.86 per share
	Provision for credit losses	$1.89 billion	$1.98 billion
	Net credit losses		$1.3 billion(+49% Y/Y and 10% Q/Q)	CEO Jane Fraser said, "“We can’t just rely on FICO scores for assessing the credit of our customers and our portfolio.” She added, “There is a tremendous amount of data that we draw upon that goes well well beyond that and that’s also, as you can imagine, something that gives us a lot more confidence.”
	Deposits		-0.3% Y/Y but down 3% in March month over month
	Loans		$652 million(-1% Y/Y)
	Investment banking revenue	$763.6 million	$774 million(-25% y/y)
Wells Fargo	Revenue	$20.08 billion	$20.73 billion
	Adjusted earnings	$1.13 per share	$1.23 per share
	Provision for credit losses	$919 million	$1.2 billion
	Net charge-offs		$564 million(+84% Y/Y and 0.7% Q/Q)	“We continue to see some gradual weakening in underlying credit performance, including higher nonperforming assets,” Chief Financial Officer Mike Santomassimo said during the conference call. “We are proactively monitoring our clients’ sensitivity to inflation and higher rates and are taking appropriate actions when warranted.” He added
	Deposits		-8% y/y
	Average loans		$948.7 million(+6% Y/Y)
	Net interest income	$13.09 billion	$13.34 billion
Bank of America	Revenue	$25.13 billion	$26.39 billion
	Adjusted earnings	82 cents per share	94 cents per share
	Average deposits		-3% Y/Y
	Average loans and leases		+7% Y/Y
	credit / debit card spend		+6% Y/Y
	Provision for credit losses		$931 million(+3,003% y/y)	Chief Financial Officer Alastair Borthwick said, “We haven’t seen any cracks in that portfolio yet.” “The consumer is in great shape.”
	Net charge-offs		$807 million(+17% Q/Q but was below pre-pandemic levels)
Goldman Sachs	Revenue	$12.79 billion	$12.22 billion
	Adjusted earnings	$8.10 a share	$8.79 a share
	Deposits		-3% Y/Y
	Loans		+7% Y/Y
	Provision for credit losses in its platform solutions business		$265 million(+59% Y/Y)	The bank said, " 1Q23 provision for credit losses reflected net charge-offs related to the credit card portfolio and growth in the point-of-sale loan portfolio."
	Net Charge-Offs		$258 million(+67%)
	Investment banking revenue		-26% Y/Y
Morgan Stanley	Revenue	$13.92 billion	$14.52 billion
	Adjusted earnings	$1.62 per share	$1.70 per share
	Deposits		$348 million(-4% y/y)
	Loans		$223 million (+7% y/y)
	Net charge offs		$71 million
	Provision for credit losses		$234 million(+311% Y/Y)
	Investment banking revenue		-24% Y/Y

Summary

The six major US banks toppped revenue estimates provided by analysts. Similarly, all of them except Goldman Sachs saw their earnings come above analysts estimates. This indicates that the health of the banking sector is still strong. However, the banks saw their average consumer debt write offs rise by 72% year-on-year to $3.97 billion. Also, their average provisions for credit losses rose by 280% year-on-year to around $6.8 billion. But the banks heads were adamant to point out that a credit crisis is on the offing.

Despite being large banks, they were not immune to recent banking turmoil as their deposits fell by an average of 4% year-on-year during the quarter. However, credit tightening was not observed during the period as loans grew by an average of 5%. However, the bank heads did not brush off the possibility of credit tightening in the near future.

Investment banking performed poorly during the quarter as deals dried up. Morgan Stanley, Citi Group and Goldman Sachs saw their investment banking revenue decline by an average of 25% year-on-year.