Bank Earnings in Focus!

The kick-off to earnings season began this morning with JPMorgan Chase (JPM), Wells Fargo (WFC), Goldman Sachs (GS) and Citigroup (C) reporting results. Expectations were elevated for the financials as the economic and market environment had created optimism for the sector. The S&P 500 Financial Sector was up nearly 9% this year and was just 3% off its record high as of Monday’s close. Let’s focus on a couple of results from this morning:

JPMorgan Chase (JPM) beat on the top-line revenue and EPS estimates and CEO Jamie Dimon stated the firm reported strong results in 3Q. The world’s largest bank said profit jumped 12% to $14.39 billion, or $5.07 per share, from a year earlier. Jamie Dimon, the Chairman and CEO commented: "The firm reported strong results in the third quarter, generating net income of $14.4 billion and delivering an ROTCE of 20%."

Dimon continued: "Each line of business performed well. Investment banking fees rose 16% as ECM and M&A activity picked up against a supportive backdrop. We continued to benefit from higher client activity and demand for financing in Markets, with record third-quarter Markets revenue of nearly $9 billion. The bank ranked #1 in U.S. retail deposits for the fifth consecutive year, and they continue to acquire new accounts at a robust pace, adding more than 400,000 net new checking accounts this quarter. Additionally, in wealth management, first-time investors surpassed 43,000, setting a new record.

JPMorgan’s provision for credit losses rose 9% to $3.4 billion, exceeding the $3.08 billion estimate, indicating that the firm is preparing for higher loan defaults down the road. The stock is relatively flat in the premarket after rallying 28% this year and is about 3% from last month’s all-time high.

Wells Fargo (WFC) also beat EPS and revenue estimates this morning. Net Interest Income (NII) rose 2% to $11.95 billion which is reflective of the steepening yield curve. Chairman and Chief Executive Officer Charlie Scharf commented, "The momentum we are building across our businesses drove strong financial results in the third quarter with net income and diluted earnings per share both up from a year ago and the second quarter. Revenue grew with higher net interest income and strong, broad-based growth in fee-based income across both our consumer and commercial businesses.” The stock is up modestly in premarket trading, extending this year’s 12% gains.

A good start to earnings season so far! With stocks just below record highs, optimism abound despite today’s weakness and valuations elevated, earnings have little room for error this season. Guidance may be key as trade concerns, the government shutdown, and elevated valuations continue to create headwinds in this bull market.

Charles Schwab and all third parties mentioned are separate and unaffiliated, and are not responsible for one another's policies, services or opinions.