Pick ‘N’ Mix

US bank earnings are a mixed bag

Image source: Diana Taliun - Shutterstock, Bean Boozled/Jelly Belly

What's going on?

Several big American banks announced third-quarter results on Tuesday, and each had a little somethin’ somethin’ different to its flavor…

What does this mean?

JPMorgan Chase was like a kid in a candy store: it reported higher-than-forecast revenue and profit, partly because it earned more than expected from investors trading “fixed income” (e.g. bonds), currency, and commodities – just like rival Citigroup (tweet this). And the banking juggernaut wasn’t done indulging its sweet tooth, with higher-than-expected revenue from companies it helped sell shares and issue debt.

But investors in competitor Goldman Sachs – once the most profitable “securities” firm in Wall Street history – won’t have shared the sugar rush. Its third-quarter profit missed predictions, falling short where JPMorgan found success: advising companies how best to raise cash. Still, it did top its rival – and perform better than expected – in helping investors trade stocks.

Why should I care?

The bigger picture: Souring on low interest rates.
Banks already know falling interest rates will hurt their profits. But lower rates might also encourage consumers and companies to “refinance” – take out new, cheaper mortgages or loans to replace older, pricier ones. JPMorgan said on Tuesday it doesn’t plan to issue riskier loans, even though its loan growth had slowed (perhaps as consumers worry more about the US economy). Citigroup – the world’s largest credit card issuer – took the same stance and reduced its promotional deals. Goldman, though, has now doubled down on the lending segment with its Apple credit card.

Zooming out: From investment banks to investment managers. 
BlackRock – the world’s largest investment manager, which stewards almost $7 trillion of cash – also reported third-quarter earnings on Tuesday. Its profit was lower than the same time last year, but higher than investors had forecast, helping its stock price rise. The company partly had its tech platforms to thank: revenue was 30% higher than a year ago, compared to only 3% growth from its core investment fee income.

Originally posted as part of the Finimize daily email.

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