US big banks report better-than-expected earnings

Today’s headlines

What’s happening: US big banks kicked off the next earnings season by disclosing their financial performance for the first quarter on Friday.

What happened: Major financial institutions, including JPMorgan Chase, Wells Fargo and Citigroup posted better-than-expected quarterly results.

These big US banks said that consumer spending had remained strong despite higher interest rates and sticky inflation.

How were the results: All three US banks reported sales ahead of market expectations.

• JPMorgan reported adjusted revenues of $42.55 billion, topping expectations of $41.64 billion.
• JPMorgan’s first-quarter earnings stood at $4.44 per share, surpassing consensus estimates of $4.17 per share.
• Citi’s revenues reached $21.10 billion, beating market views of $20.38 billion.
• Its quarterly earnings came in at $1.58 per share, exceeding projections of $1.23 per share.
• Wells Fargo posted revenues of $20.86 billion, ahead of expectations of $20.2 billion.
• Its earnings stood at $1.20 per share, topping consensus of $1.06 a share.

Why it matters: Banks have been benefitting from higher interest rates, which has translated to profit growth. With the rates outlook now uncertain, that positive effect for banks is waning.

JPMorgan said its total deposits were $2.43 trillion in the quarter, higher than the expected $2.4 trillion, while loans were $1.31 trillion, slightly below projections of $1.33 trillion. However, the bank showed some resilience, recording $1.88 billion in provision for credit losses, down from the projected $2.78 billion.

Citigroup’s total cost of credit came in at $2.37 billion, below estimates of $2.64 billion. The bank also kept its fiscal year adjusted revenue forecast unchanged at around $80 billion to $81 billion.

Citigroup’s net interest income (NII) rose 1% year-over-year. Wells Fargo’s NII declined 8% in the first quarter, while JPMorgan’s NII climbed 11%.

Citigroup, JPMorgan and Wells Fargo saw higher credit-card spending during the first quarter. Credit-card spending surged 8% year-over-year to $471 billion at the three banks put together.

How shares responded: Citigroup’s shares fell 1.7% to close at $59.68 on Friday, following the release of quarterly results. Shares of JPMorgan declined by 6.5% to $182.79, while Wells Fargo’s stock slipped 0.4% to settle at $56.47.

What to watch: Investors will watch comments from Fed officials as well as inflation rate data.

The markets today

The Canadian dollar will be in focus today ahead of a basket of major economic reports

Context: The CAD/USD forex pair fell to a near five-month low on Friday amid strength in the US dollar.

Details: During its April meeting, the Bank of Canada kept its overnight rate target unchanged at 5%. Looking ahead, markets are expecting the BoC to slash rates in June.

According to the Canadian Real Estate Association, home sales in Canada rose 0.5% in March and climbed 1.7% on an annual basis.

Strength in the US dollar exerted pressure on the CAD/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained 0.69% to 106.01 on Friday.

Some strength in the price of crude oil, one of Canada’s major exports, limited the overall losses for the loonie. WTI crude oil prices gained 64 cents to close at $85.66 per barrel on Friday.

The CAD/USD forex pair fell 0.63% to 1.3776 on Friday, after hitting its lowest intraday level since November 14 at 1.3779. For the week, the loonie lost more than 1.3%, recording its biggest weekly decline since May 2023.

The S&P/TSX Composite Index dipped 0.95% to close at 21,899.99. Canada’s government bond yields moved lower across the curve, following moves in US Treasuries.

What to watch: Investors await the release of economic data on Canada’s manufacturing sales, new motor vehicle sales and wholesale sales today. Canada’s manufacturing sales are expected to increase 0.7% in February, following a 0.2% gain in the prior month.

Car registrations in Canada, which fell to 116.874 units in January, are projected to increase to 119,000 in February. Analysts expect wholesale sales in Canada to increase by 0.8% in February, compared to a 0.1% gain in January.

Other Markets: US trading indices closed lower on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 1.24%, 1.46% and 1.66%, respectively.

The news shaping the markets

Ukraine’s top commander said that Russia’s military forces are looking to capture the city of Chasiv Yar by May 9. The news sent the RUB/USD pair higher in forex trading this morning.

New Zealand’s number of visitor arrivals jumped by 35% year-over-year to 362,836 in February, lending support to the NZD/USD forex pair.

The People’s Bank of China held the medium-term lending facility at 2.5% on April 15, which sent the CNY/USD pair slightly lower in forex trading this morning.

Argentina’s consumer prices rose by 11% in March, easing from 13.2% a month ago, which lent support to the ARS/USD forex pair.

India’s annual retail inflation slowed to 4.85% in March, from 5.09% in the previous month, sending the INR/USD pair higher in forex trading this morning.

What else to watch today

Saudi Arabia’s inflation rate and wholesale price inflation, India’s wholesale prices, Turkey’s unemployment rate, labour force participation rate and central government budget balance, Eurozone’s industrial production, US retail sales, NY Empire State manufacturing index, business inventories and NAHB/Wells Fargo housing market index, India’s Total passenger vehicle sales and balance of trade, as well as central bank of Brazil’s focus market readout.