AFP – JPMorgan Chase reported record quarterly profits on Tuesday behind strong consumer businesses on a day of mixed bank earnings that underscored the sector’s vulnerability to lower Federal Reserve interest rates.
Wells Fargo also notched higher profits, while Goldman Sachs reported a dip in earnings but still topped analyst expectations.
The trio of bank results moved markets into the heart of second-quarter earnings season, which comes against a backdrop of uncertainty over international trade and an anticipated easing of monetary policy, with the Fed expected to cut interest rates later this month.
Bank profits have been boosted the last few years from a series of interest rate hikes. But the Fed has pivoted away from that stance amid concerns about a weakening manufacturing sector, sluggish inflation and the impact of trade conflicts on the economy.
Lower interest rates are generally viewed as a drag for large banks because it reduces the net interest income — the difference between the interest rates it charges consumers for loans and the interest it must pay for deposits.
At JPMorgan, key areas of strength included consumer banking, where it scored from higher net interest income, the credit card business and higher auto loans and lease originations.
Net profit came in at $9.7 billion, up 16.1 percent and a company record. Revenues were up 4.1 percent to $29.6 billion.
Chief executive Jamie Dimon said uncertainty about issues such as trade and monetary policy is "a constant" while geopolitical tensions "may be a little bit higher now than normal," but added that "the consumer in the United States is doing fine" and economic conditions are solid in other key markets.
"So I wouldn’t get too pessimistic yet," Dimon said.
JPMorgan executives said they anticipate up to three interest rate cuts this year, and forecast $57.5 billion in 2019 net interest income, down from $58 billion previously.
– Higher profits at Wells –
At Wells Fargo, net income rose 19.7 percent to $6.2 billion, while revenues were essentially flat at $21.6 billion.
Wells Fargo experienced a dip in net interest income due to a significant jump in interest payments for deposits. But that was largely offset by other gains, such as higher service charges on deposit accounts and lower non-interest expenses.
Executives were peppered with questions about the expected hit from Fed actions, as well as additional costs for auditing, risk management and other governance initiatives following a fake accounts scandal that roiled the bank a couple of years ago.
Lingering skepticism of the bank prompted the resignation in March of chief executive Tim Sloan. Interim chief executive Allen Parker said he had no information about the selection of a new CEO and that the board was overseeing the search for an outsider to lead the bank.
– Goldman trading hit –
At Goldman Sachs, net income was $2.2 billion, down 6.4 percent from the year-ago period. Revenues dropped 1.8 percent to $9.5 billion.
Goldman suffered from a decline in fixed income, currency and commodity trading, a weakness at other large banks due in part to uncertainty over trade and interest rates.
"We’re encouraged by the results for the first half of the year as we continue to invest in new businesses and growth to serve a broader array of clients," chief executive David Solomon said in a statement.
"Given the strength of our client franchise, we are well positioned to benefit from a growing global economy."
Shares in JPMorgan closed trading up 1.1 percent at $115.12. Wells Fargo dropped 3.0 percent to $45.30, while Goldman Sachs added 1.9 percent, rising to $215.52.