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Big US banks report mostly lower Q4 profits

 

Monday, January 15, 2024

Today’s headlines

What’s happening: Some of the biggest US banks released their results for the fourth quarter on Friday.

What happened: Investors assessed the results from Bank of America, JPMorgan, Citigroup and Wells Fargo, most of which reported lower quarterly profits in a choppy quarter, with onetime charges and job cuts.

However, these banks still maintained an upbeat tone for the country’s economy ahead, with consumers remaining resilient.

How were the results: Big US banks reported mixed results for the fourth quarter on Friday.

  • Bank of America’s adjusted revenues fell 4% year-over-year to $23.5 billion, missing the Wall Street expectations of $23.7 billion. The company’s adjusted earnings came in at 70 cents per share, beating the consensus estimates of 68 cents per share.
  • JPMorgan Chase & Co reported net revenues of $39.943 billion and earnings of $3.97 per share, ahead of expectations of $39.78 billion and $3.32 per share, respectively.
  • Citigroup’s revenues fell 3% year-over-year to $17.44 billion and was short of market expectations of $18.74 billion. However, its adjusted earnings of 84 cents per share beat the consensus estimates of 81 cents per share.
  • Wells Fargo & Company’s revenues grew by 2% to $20.48 billion, slightly ahead of the estimates of $20.28 billion. Its GAAP earnings of 86 cents per share also beat expectations of 71 cents per share.

Why it matters: The US Federal Reserve announced several interest rate hikes over the last couple of years to bring inflation down to the central bank’s 2% target. Although high interest rates during 2023 provided a boost to the net interest income of banks, the pause in ratee hikes impacted their fourth-quarter figures.

Citi reported a dismal fourth-quarter, posted an unexpected loss of $1.8 billion versus a year-ago profit of $2.5 billion. The bank plans to reduce 20,000 jobs over the next two years. Bank of America reported a 50% decline in profits from a year ago due to a DIF (deposit insurance fund) charge, which is a onetime hit.

JPMorgan reported a strong quarterly performance, despite recording a decline in profits. The bank posted a record profit of $49.6 billion for the year. “The U.S. economy continues to be resilient, with consumers still spending, and markets currently expect a soft landing,” said CEO Jamie Dimon. Customers at JPMorgan spent 8% higher on their cards versus the year-earlier period.

Out of the four major banks reporting earnings, Wells Fargo was the only one to record a surge in quarterly profits, amid cost cuts. Wells Fargo also announced layoffs, reporting a severance expense of $969 million.

All the major lenders set aside more money in a bid to cover souring loans.

How shares responded: Bank of America’s shares fell 1.1% to close at $32.80, while JPMorgan’s shares fell 0.7% to $169.05 and Wells Fargo’s stock lost 3.3% to $47.40 on Friday.

Shares of Citigroup bucked the trend and gained 1% to settle at $52.62.

What to watch: Investors will continue monitoring overall inflation levels and the Federal Reserve’s monetary policy, both of which could significantly impact banking earnings ahead.

The markets today

The CAD/USD forex pair will be in focus today ahead of a basket of major economic reports

Context: The CAD/USD pair edged lower on Friday, amid some strength in the US dollar.

Details: Markets continued to assess the Bank of Canada’s upcoming interest rate decision. On December 6, the Bank of Canada had kept interest rates unchanged, which marked the third straight month of policymakers opting to maintain the rates.

Canada’s annual inflation rate came in steady at 3.1% in November, higher than market expectations of 2.9%. Data on inflation rate for December will be released on Tuesday, with markets expecting an acceleration to 3.3%.

Strength in the US dollar exerted pressure on the loonie on Friday. The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained 0.14% to 102.44.

Higher prices for crude oil, one of Canada’s major exports, limited the overall losses for the Canadian dollar. WTI crude oil prices jumped around 1% to close at $72.76 per barrel on Friday.

The CAD/USD forex pair fell 0.11% to 1.3410 on Friday. The S&P/TSX Composite index rose 0.34% to close at 20,990.22, driven by energy stocks on higher crude oil prices.

What to watch: Investors await the release of data on manufacturing sales, car registrations and wholesale sales from Canada today. Analysts expect Canada’s manufacturing sales to increase 1.2% in November, after a 2.8% decline a month ago.

Car registrations in Canada, which fell to 151,144 units in October, are expected to increase to 154,000 units in November. Wholesale sales in Canada are expected to increase 0.8%, compared to a 0.5% decline in the earlier month.

Other Markets: European indices closed higher on Friday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index up by 0.64%, 0.95%, 1.05% and 0.84%, respectively.

The news shaping the markets

France and Germany reaffirmed their support of Ukraine for as long as necessary against its ongoing war with Russia. The news sent the safe-haven US dollar index higher in forex trading this morning.


Ireland’s BNP Paribas real estate construction PMI increased to 45.1 in December, versus 44.5 in November, lending support to the EUR/USD forex pair.


Australia’s job advertisements rose 0.1% in December, versus a decline of 5.1% a month ago, which sent the AUD/USD pair higher in forex trading this morning.


India’s total passenger vehicle sales rose by 3.2% year-over-year to 242,920 in December, slowing from November’s 4.3% surge, which exerted pressure on the INR/USD forex pair.


The People’s Bank of China held its interest rate at 2.50%, sending the CNY/USD pair lower in forex trading this morning.

What else to watch today

Japan’s machine tool orders, Saudi Arabia’s inflation rate and wholesale prices, India’s wholesale prices, Germany’s wholesale prices and full year gdp growth, Turkey’s central government budget balance, Italy’s balance of trade, Eurozone’s balance of trade and industrial production, Russia’s foreign exchange reserves, Brazil’s industrial entrepreneur confidence index and Central Bank of Brazil focus market readout, as well as India’s balance of trade.


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