JP Morgan and Citigroup kick off US bank earnings season with rising revenues but shares fall

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JP Morgan and Citigroup led Wall Street's earnings season out of the blocks (Source: Getty)

Two of America’s biggest banks beat analyst expectations in third-quarter results announced today, despite falling trading revenues.

Citigroup and JP Morgan Chase both reported higher revenues than pre-results consensus, although the former’s trading unit offered a relatively stronger performance.

Fixed income trading revenues fell by 27 per cent for JP Morgan, while Citi reported a 16 per cent fall in the equivalent division.

Low volatility in recent months has hit investment banks’ trading revenues as investors have sat on their hands, particularly compared to a bumpy third quarter in 2016 as Brexit rocked global bond markets.

Read more: US bank earnings season starts with earnings growth expected

Citigroup revenues rose two per cent year-on-year to $18.2bn, driven by growth in its institutional client business and consumer banking, although that was partly offset by weaker corporate revenues.

Profit rose by eight per cent to $4.1bn, aided by a $355m bump from selling its fixed income analytics business to the London Stock Exchange Group in May.

JP Morgan’s revenues rose by three per cent to $26.2bn, although stronger loan growth made up for declines in profits from the markets segment of the bank. However, shares in both companies fell, with investors unimpressed despite both overshooting forecasts for earnings per share, a key investor metric.

Citi stock fell by 3.43 per cent as earnings per diluted share came in at $1.42, while JP Morgan's reported income of $1.76 per share prompted a gentler 0.88 per cent share price decline.

Read more: US bank shares fall despite trio beating expectations

The US banking sector has benefited from a strengthening domestic economy, while rising interest rates from the Federal Reserve central bank added to bank profitability by supporting lending margins.

Both banks have also ridden a wave of optimism from investors who anticipate the administration of US President Donald Trump will significantly cut regulation for the sector.

Jamie Dimon, JP Morgan chairman and chief executive, said they were “solid results in a competitive environment”, hailing the firm’s move to the top of the charts in total US deposits.

“Commercial banking again delivered outstanding performance with record revenue as our long-term investments in the business are paying off,” he added.

Citigroup chief executive Mike Corbat described the bank’s performance as “a very strong quarter, showing the balance of our franchise”, adding the firm had managed costs “tightly”.

Bank of America, Wells Fargo and PNC Financial Services all report results tomorrow.

Read more: Citigroup reveals Brexit plans to create 150 new EU jobs

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