Big Bank Earnings Impress, Net Interest Income Surges

Goldman Sachs

Goldman Sachs ($GS) released earnings of $8.79 per share, beating the consensus estimate of $8.14 per share. The bank reported revenues of $12.22 billion for the quarter ended March 2023, compared to year-ago revenues of $12.93 billion. Goldman’s revenue figures from its Global Banking & Markets and FICC sales & trading also missed expectations.

Goldman’s annualized return on equity (ROE) hit 11.6% in Q1, above the consensus projection of 11.1%. Net interest income stood at $1.78 billion in the quarter, well below the expected $2.18 billion. Total assets under management (AUM) rose 12% year-over-year to $2.67 trillion

The bank is also selling its GreenSky unit, a retail finance business, which it acquired in late 2021, CEO David Solomon told analysts during a Tuesday conference call. The business was acquired for $2.24 billion in an all-stock deal for what the bank called the "biggest fintech platform for home improvement loans."

Marcus, the banks retail finance division, has lost billions of dollars since David Solomon opened the business unit a few years ago.

Morgan Stanley

Morgan Stanley ($MS) reported first-quarter earnings of $1.70 a share, down 19% to $2.98 billion from a year earlier on declines in investment banking and trading. Companywide revenue slipped 2% to $14.52 billion. Expenses at the bank climbed 4% to $10.52 billion, mostly fueled by higher-than-expected compensation costs.

CEO James Gorman has led Morgan Stanley in becoming a leader in private wealth management through a series of acquisitions. Starting in 2020, the bank purchased $20 billion worth of smaller investment managers like Eaton Vance and retail brokerage platform E-Trade.

“The investments we have made in our wealth management business continue to bear fruit as we added a robust $110 billion in net new assets this quarter,” Gorman said in the earnings release. “Equity and fixed Income revenues were strong, although investment banking activity continued to be constrained.”

Wealth management revenue climbed 11% from the year-earlier period to $6.56 billion, fueled partially by rising net interest income. The bank’s fixed income traders produced $2.58 billion in revenue, exceeding the $2.33 street estimate.

Investment banking revenue dropped 24% to $1.25 billion on fewer completed M&A deals and lower stock and debt issuance, edging out the $1.2 billion estimate.

CitiGroup

The multinational bank ($C) reported first-quarter earnings of $1.86 per share, which came in ahead of the FactSet consensus of $1.65.

The results were fueled in part by personal banking revenue rising 18% year over year, reflecting higher interest rates. Citigroup reported a total provision for loan losses of $1.98 billion, slightly above the $1.89 billion provision for credit losses expected by analysts, according to StreetAccount, and up 7% from the prior quarter.

“We are in a strong position to navigate whatever environment we face, which is particularly relevant given the degree of uncertainty today." said CEO Jane Fraser.

Like Goldman Sachs, Citigroup closed two divestitures during the first quarter as part of a broader restructuring plan away from retail banking, including its consumer business in India that generated a gain on the sale. Net income was down 19% year over year when excluding the impact of the sales.

Bank of America

The bank reported profit of $8.2 billion, or 94 cents a share, topping expectations that it would earn 81 cents a share. Revenue grew 13% to $26.3 billion, well ahead of the $25.2 billion forecast by analysts surveyed by FactSet. Net interest income jumped 25% to $14.4 billion, due to “benefits from higher interest rates and solid loan growth.”

Bank of America’s Chief Financial Officer Alastair Borthwick said that the bank expects second-quarter net interest income (NII) of about $14.3 billion, which is in line with analyst estimates.

He issued a few caveats about the outlook, including the assumption that “interest rates in the forward curve materialize, and that includes one more hike and then a couple of cuts in 2023.”

It built up its net reserves by $124 million, compared with a release of $362 million in the year-ago quarter. Combined credit and debit card spending rose 6% to $210 billion, while it added 130,000 net new consumer checking accounts. It set a record of 36.1 million consumer checking accounts. Its provision for credit losses increased by $901 million to $931 million.

JP Morgan Chase

Jamie Dimon's bank ($JPMC) posted record first-quarter revenue on Friday that topped analysts’ expectations as net interest income surged almost 50% from a year ago on higher rates. Adjusted EPS was $4.32 per share, beating estimates of $3.41 per share. Revenue was $39.34 billion vs. an expected $36.19 billion.

The bank said profit jumped 52% to $12.62 billion, or $4.10 per share, in the first three months of the year. Companywide revenue rose 25% to $39.34 billion, driven by a 49% rise in net interest income to $20.8 billion.

“The U.S. economy continues to be on generally healthy footings — consumers are still spending and have strong balance sheets, and businesses are in good shape,” CEO Jamie Dimon said in a release. “However, the storm clouds that we have been monitoring for the past year remain on the horizon, and the banking industry turmoil adds to these risks."

Charles Schwab

Charles Schwab Corp. ($SCHW) reported first-quarter 2023 adjusted earnings of 93 cents per share, beating a consensus of 90 cents. Revenue for the quarter rose 10% from a year ago to $5.1 billion. Net interest revenue of $2.8 billion met consensus expectations, rising 27% from a year ago.

Despite this, deposits dropped for the fourth straight quarter to $325.7 billion, down 30% from the same period a year ago and $3.9 billion shy of consensus expectations. The deposit flight cut revenue from bank deposit account fees in half to $151 million.

"Maintaining the capital and liquidity required to support growth remains the firm's primary balance sheet objective," said CFO Peter Crawford, after announcing a temporary halt to the banks share repurchase program.

Schwab added 1.04 million new brokerage accounts during the quarter. As of Mar 31, 2023, the company had 34.1 million active brokerage accounts, 1.7 million banking accounts and 2.4 million corporate retirement plan participants.

State Street

State Street ($STT) stock fell 14.7% Monday after the bank missed consensus estimates for first-quarter profit and revenue on lower fee revenue. First-quarter net income fell to $549 million, or $1.52 a share, from $604 million, or $1.57 a share, in the year-ago quarter.

First-quarter revenue rose slightly to $3.101 billion from $3.081 billion in the year-ago quarter. Servicing fees fell 11%, management fees dropped 12% and foreign-exchange trading services revenue dipped 5%, while securities finance revenue increased by 14%.

State Street CEO Ron O’Hanley said the company’s first-quarter results “reflect the resiliency of our business model, notwithstanding continued interest rate increases and subsequent significant market movements, volatility and disruption within other parts of the banking industry.”