US Banks report mixed earnings amid trade uncertainty

Last Updated : 15 October 2019, 18:06 IST
Last Updated : 15 October 2019, 18:06 IST

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Large US banks reported mixed quarterly results on Tuesday, challenged by a shifting interest rate landscape and uncertainty about global trade but bolstered in some cases by strong consumer activity.

The biggest US bank by assets, JPMorgan Chase, scored higher profits due to robust consumer lending even as Chief Executive Jamie Dimon offered a subdued outlook on the US economy, due in part to lingering worries about an economic slowdown due to the trade war.

Earnings also rose at Citigroup, but profits fell sharply at Goldman Sachs amid a drop in key advisory services and at Wells Fargo, which was hit by higher legal costs as it continues to try to pivot from a series of scandals and regulatory issues.

JPMorgan reported profits of $9.1 billion, up 8.4 percent from the year-ago period.

Revenues were $29.3 billion, up 7.3 percent.

The increase in profits comes as large banks manage a shift in monetary policy by the US Federal Reserve that has dampened the industry's profit outlook somewhat.

Lower interest rates typically weigh on earnings at banks, which earn profits from the margin between their loans and deposits.

On the upside, JPMorgan scored higher revenues in home lending as mortgage costs for consumers eased. The company also reported another increase in credit cards and auto lending.

US economic growth has "slowed slightly," Dimon said.

"The consumer remains healthy with growth in wages and spending combined with strong balance sheets and low unemployment levels," Dimon added.

"This is being offset by weakening business sentiment and capital expenditures mostly driven by increasingly complex geopolitical risks, including tensions in global trade."

At Goldman Sachs, third-quarter profits were $1.8 billion, down 26.9 percent from the year-ago period.

Revenues were $8.3 billion, down 5.6 percent.

The investment bank suffered a drop in financial advisory and equity and debt underwriting revenues but won an increase in trading businesses that have been a headwind in recent quarters.

Wells Fargo also suffered a significant drop in profits, which came in at $4.6 billion, down 23.3 percent.

Revenues edged up slightly to $22 billion.

Results were dented by $1.6 billion in litigation costs connected to a fake accounts scandal that has weighed on the bank since late 2016.

Wells Fargo announced late last month that it named Charles Scharf as its new chief executive to begin later this month.

At Citigroup, net income was up 6.3 percent at $4.9 billion on a one percent rise in revenues to $18.6 billion.

Chief Financial Officer Mark Mason described the client environment as cautious.

"You look in the market and see cautious sentiment around things like capital spending, things like mergers and acquisitions and things like IPOs," Mason said on a conference call with reporters. "You certainly hear that in conversations with clients."

Shares of JPMorgan rose 2.2 percent to $118.95 in pre-market trading, while Goldman Sachs fell 2.3 percent to $201.10. Citigroup fell 0.9 percent to $69.62 and Wells Fargo shed 1.1 percent to $48.73.

Published 15 October 2019, 14:11 IST

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