The kickoff to earnings season usually has two firms reporting on the same day — JPMorgan and Wells Fargo — and the stories diverge wildly even though the same broad forces are at play.
Tax cuts may have dominated the headlines, but then again, the tale remained the same as it has been the last few quarters. JPMorgan showed some momentum; Wells has some work to do.
JPMorgan beat Wall Street expectations by seven pennies, excluding a $2.4 billion charge taken in the latest quarter tied to the Tax Cuts and Jobs Acts. Wells said it booked $3.3 billion of its profit thanks to the cut.
For its part, JPMorgan’s bottom line came in at $1.76 a share, and revenues stood at $25.45 billion, where $25.1 billion had been expected.
Drilling down from those JPMorgan headline numbers, loan growth was up 4 percent year over year. In remarks to analysts, CFO Marianne Lake said the real impact of the aforementioned tax reform is still being examined, with the benefit to accrue to end customers, perhaps through, for example, subsidies for low-income customers taking out loans. But look to JPMorgan to “lean into” several initiatives, among them technology-related endeavors.
And speaking of technology, the company disclosed that active digital customers stood at 46.7 million, up from 43.8 million at the end of last year. Mobile customers numbered 30 million, compared to 26.5 million last year. The company continued to trim its branch footprint to 5,130 as compared to 5,258.
Expanding a bit on digital initiatives, and in response to an analyst question on banking, Lake called it a “nexus” for firm efforts — to which CEO Jamie Dimon said, “In treasury services, we’re bringing you a new international payment system. The banking … rebuilt in real-time has an overall value: the real-time payment business.” Turning to the consumer side of the equation, Dimon said of digital offerings that “it’s [gotten] better and better and better. There’s a whole bunch more coming. Zelle and QuickPay … we’re definitely gaining clients.”
As might have been expected, trading was a weak spot, as fixed markets revenue was off 34 percent year over year, with low volatility and credit spreads (remarked upon by management as being tight) the culprits. The company also said that it had booked as much as $273 million in trading and credit losses from a solitary customer during the quarter — reported by The Wall Street Journal to be Steinhoff International Holdings, based in South Africa.
Wells Fargo did not fare as well as its peer, with total loans down 1 percent year over year. The firm reported credit card loans up 3 percent and credit card sales volume at $168 billion, with $148.5 billion last year. Merchant processing volume stood at $321.4 billion ($284.9 billion last year).
As for expectations: Earnings came in at $1.16 a share, while the Street had seen $1.23. Revenue stood at $22.1 billion, up from $21.6 billion last year. But consumer loans slipped to $956.8 billion, where they had been $967.6 billion last year.
That comes despite the economic tailwind that boosted its larger brethren (and Wells’ net interest margin actually declined in the quarter, despite interest rate hikes) and shows the lingering impact of several scandals that have dominated headlines in recent months.