Q3 Bank Earnings Likely to See Continued Strong Debit Spending

Seems like yesterday we were looking toward second-quarter earnings reports.

And yet here we are, just several hours away from what will be the opening salvos of the third-quarter 2021 earnings season, which, per usual, kicks off with the big banks weighing in on the state of the consumer, enterprise clients — and the state of spending overall.

The names, of course, are familiar, household names within the financial services sector including JPMorgan, Goldman Sachs, Wells Fargo and Citigroup.

As usual, we’ll be digging deeper into the numbers than might be seen with other sites, with an eye not on Wall Street-derived trading revenues and investment banking activity, but on debit and credit spending, on views of crypto as a medium of exchange, and where discussed, the continuing drive to bring B2B payments into the digital age.

We’re likely to see some continuance of trends that have been in place for a few quarters, where debit transactions have been buoyant, and where credit spending shows some green shoots.

“The health of the economy is the key driver for banks,” Alison Williams, an analyst at Bloomberg Intelligence, told The New York Times in anticipation of the reports. “The consumer is out there spending — similarly, businesses look healthy.” In addition, we’re likely to see a continued release of reserves that have been taken against anticipated loan losses that never materialized.

And, in a trend that has lasted since before the pandemic, the move to mobile banking will proceed apace — in recent quarters, banks such as JPMorgan reported that active mobile customers gained double-digit percentage points.

JPMorgan  

In the most recent quarter, the biggest bank in the U.S. (by assets) said that debit and card sales volume  was up 19% from the first quarter of this year. Credit card sales volume — excluding commercial cards — stood at $223.7 billion, up 22% from the first quarter of this year.

Read also: JPMorgan Credit Card Sales Volume Surges 45 Percent, Active Mobile Customers Rise 10 Percent.

The average estimate of analysts, as projected by Yahoo Finance, pegs revenues for the September quarter at $29.8 billion, with earnings at about $3 a share.

Goldman Sachs  

The Street consensus has pegged Goldman Sachs earnings at $10.15, with revenues at $11.7 billion. Management may give some insight into how the company’s digital banking efforts are progressing, via Marcus. Last quarter, the company  consumer and wealth management, which includes the digital bank known as Marcus, saw a record $1.8 billion of net revenues in the period. The company said in its supplemental materials released alongside earnings that the consumer banking operations saw revenues of $363 million, 41% higher than a year ago, as deposits and credit card balances grew.

Read more: Goldman Sees 41 Pct Surge In Consumer Banking Revenues

Citigroup 

Citigroup, per consensus, is on tap to see earnings of about $1.89 in the latest quarter on sales of $17 billion. As we noted in our own coverage of the company’s latest earnings report, fee growth year over year stood at 20% in Treasury and Trade Solutions (TTS). The TTS segment had $644 billion in end-of-period deposits, while revenues from this segment stood at $2.3 billion, up 6% from the first quarter. Card spending in the North American operations was up 20% sequentially. In reference to digital growth, the company said that active digital customers were up 3% year over year to 21 million.

See: Citi’s US Branded Card Spend Surges 40 Pct Year On Year

Wells Fargo and Bank of America 

Wells, which has faced its share of controversy, is expected to earn 98 cents a share on an estimated top line of $18.4 billion. The company said last quarter that its cards division was up 14% on higher POS purchases, to a bit more than $25 billion, while auto loans gained 7%.

Separately, Bank of America said in its most recent results that credit and debit spend saw a 28% surge in retail segments compared to last year. Spending on food in the similar period was up 28%, while travel spending was up more than 220% from a year ago.

Active mobile banking customers in the most recent quarter stood at 31.8 million, up from 31.5 million in the first quarter of this year. Zelle payments in the period showed sales volume of 189 million transactions and $57 billion, up from a respective 117 million and $32 billion last year. Analysts see BofA earning 71 cents a share on revenues of $21.8 billion.

Read also: Bank Of America: Active Digital Banking Users Up 3 Pct To 40.5M