Summary
The recent earnings season for U.S. financials reveals common trends and themes, particularly around robust net interest income, strategic diversification, and shareholder returns. Broadly, banks exceeded expectations in both revenue and earnings per share, highlighting solid financial positioning amidst a complex economic backdrop.
Revenue Strength and Interest Income Growth
Overall, the banks reported positive revenue performance, mainly driven by strong net interest income growth due to effective rate management, disciplined asset and liability positioning, and diversified fee-based income. Institutions like Bank of America and U.S. Bancorp achieved sequential growth in net interest income, while Goldman Sachs and Citigroup leveraged investment banking and trading activities for revenue diversification.
Operational Efficiency and Expense Management
Banks showcased disciplined cost management, achieving operational efficiencies even as they made substantial investments in technology and business transformation. For instance, Truist Financial and Citigroup reported expense control while driving forward with strategic digital and structural enhancements. Notably, this expense discipline supports banks in generating positive operating leverage, as seen in JPMorgan Chase and PNC Financial Services.
Robust Capital Management and Shareholder Focus
Across the sector, banks continued significant capital returns through share repurchases and dividends, underscoring a shareholder-friendly approach. Institutions like Bank of America and First Citizens BancShares emphasized this commitment through consistent share buybacks and dividend payments, with several banks highlighting improved capital ratios and liquidity levels.
Credit and Loan Portfolios
While credit quality remains stable for most banks, a cautious approach was noted in provisioning for potential credit risks, with some like JPMorgan Chase increasing reserves. Banks are also optimizing loan portfolios, with some shifting focus from commercial real estate to other lending areas to manage risk and sustain returns.
Digital and Strategic Expansion
Digital adoption and operational innovation were common themes, with institutions like Bank of America and Truist reporting increased digital engagement and new client acquisition. This digital push not only enhances customer engagement but also supports revenue growth across traditional and emerging channels.
Overall, U.S. banks are showing resilience and adaptability in a shifting macroeconomic environment, with a balanced approach to growth, cost control, and capital allocation. They are also strategically positioned to navigate potential headwinds from economic uncertainties and anticipated rate cuts in the coming quarters.
Top Portfolio Holdings
JPMorgan Chase & Co (JPM)
Portfolio weight: 6.17%
EPS: $ 4.370 vs Bloomberg consensus of $ 4.009
Revenue: $ 43.315B vs Bloomberg consensus of $ 41.899B
“The Firm reported strong underlying business and financial results in the third quarter, generating net income of $12.9 billion and an ROTCE of 19%. In the CIB, investment banking fees grew 31%, while Markets revenue was resilient, rising 8%. Payments fees grew by double-digits as investments are fueling organic growth. In CCB, we ranked #1 in U.S. retail deposits for the fourth consecutive year. Card loans increased 11%, and we saw robust acquisition of 2.5 million accounts. Finally, in AWM, asset management fees rose 15%, and long-term net inflows were a record $72 billion.” – Jamie Dimon, CEO.
JPMorgan Chase reported strong Q3 earnings with a net income of $12.9 billion and revenue growth of 6% year-over-year to $43.3 billion, indicating robust financial performance. Despite challenges in the Corporate & Investment Bank (CIB) segment with revenue decline, the Asset & Wealth Management (AWM) segment achieved record revenues. The firm also highlighted a decrease in expenses by 4% year-on-year, contributing to profitability. However, credit costs rose to $3.1 billion due to net charge-offs and reserve building, reflecting a cautious approach to potential credit risks. Looking ahead, JPMorgan Chase expects 2024 Net Interest Income (NII) to be approximately $92.5 billion with an adjusted expense outlook of about $91.5 billion.
Bank of America Corp (BAC)
Portfolio weight: 6.22%
EPS: $0.810 vs Bloomberg consensus of $0.761
Revenue: $25.500B vs Bloomberg consensus of $25.321B
“We reported solid earnings results, delivering higher average loans and our fifth consecutive quarter of sequential average deposit growth. Net interest income increased over the second quarter, complimented by double-digit, year-over-year growth in investment banking and asset management fees as well as sales and trading revenue. We also continue to benefit from our investments in the business, I thank our teammates for another good quarter. We continue to drive the company forward in any environment.” – Brian Moynihan, CEO.
Bank of America reported a positive quarter with a 4-5% year-over-year increase in consumer payments, indicating strong consumer activity. Net interest income grew by 2% this quarter with expectations of further growth, showcasing effective interest rate management. The bank also highlighted a strong capital position, returning $5.6 billion to shareholders through dividends and share repurchases. Significant digital platform engagement was noted with 48 million active digital users, and the bank achieved organic growth by adding 360,000 net new checking accounts and 5,500 net new wealth management relationships. Additionally, there was a $16 billion growth in commercial loans and a $20 billion increase in total deposits, alongside an 18% growth in investment banking fees and a 12% increase in sales and trading revenue.
Wells Fargo & Co (WFC)
Portfolio weight: 6.38%
EPS: $1.520 vs Bloomberg consensus of $1.284
Revenue: $20.366B vs Bloomberg consensus of $20.411B
“We had solid results in the third quarter with both net income and diluted earnings per share up from the second quarter. Our earnings profile is very different than it was five years ago as we have been making strategic investments in many of our businesses and de-emphasizing or selling others. Our revenue sources are more diverse and fee-based revenue grew 16% during the first nine months of the year, largely offsetting net interest income headwinds. We have maintained strong credit discipline and driven significant operating efficiencies in the company while investing heavily to build a risk and control environment appropriate for a bank of our size and complexity. While we believe there are significant benefits still to come from our investments, it is gratifying to see our actions having an impact on our business metrics and financial results.” – Charlie Scharf, CEO.
Wells Fargo reported a solid Q3 financial performance with notable improvements in net income, earnings per share, and returns on equity. The bank has successfully diversified its revenue streams, with significant growth in fee-based revenue and non-interest income, alongside strategic investments in consumer and small business banking segments showing positive results. However, challenges remain with weak commercial loan demand and a decline in net interest income, reflecting broader economic uncertainties. The bank’s credit performance has improved, and its capital management strategies, including stock repurchases and dividend increases, demonstrate a strong commitment to shareholder value. Looking ahead, Wells Fargo’s cautious outlook for 2024 net interest income suggests potential headwinds in interest income growth.
Goldman Sachs Group Inc (GS)
Portfolio weight: 6.28%
EPS: $8.400 vs Bloomberg consensus of $7.213
Revenue: $12.699B vs Bloomberg consensus of $11.768B
“Our performance demonstrates the strength of our world-class franchise in an improving operating environment. We continue to lean into our strengths – exceptional talent, execution capabilities and risk management expertise – allowing us to effectively serve our clients against a complex backdrop and deliver for shareholders.” – David Solomon, CEO.
Goldman Sachs reported a strong financial performance in the third quarter of 2024, with net revenues of $12.7 billion and earnings per share increasing by 54% year-over-year. The firm achieved a record $3 trillion in assets under supervision, marking the 27th consecutive quarter of long-term net inflows, and raised over $50 billion in alternatives, expecting to exceed $60 billion for the year. Strategic focus on enhancing durable revenue streams resulted in a record $3.4 billion in management and other fees and private banking and lending revenues, up 9% versus last year. However, concerns were raised about the transparency and interconnectedness of capital requirements across various regulatory proposals. Goldman Sachs also highlighted its strong position in investment banking and markets, with significant achievements in global banking and markets and a commitment to returning $2 billion to shareholders in the quarter.
Citigroup Inc (C)
Portfolio weight: 6.60%
EPS: $1.534 vs Bloomberg consensus of $1.311
Revenue: $20.315B vs Bloomberg consensus of $19.837B
“In a pivotal year, this quarter contains multiple proof points that we are moving in the right direction and that our strategy is gaining traction, including positive operating leverage for each of our businesses, share gains and fee growth. While we continue making substantial investments in our number one priority—our Transformation—the efficiencies gained from our simplification and other efforts drove a 2% reduction in expenses. We built on our long history of innovation by launching a new cross-border payments capability with Mastercard and a $25 billion private credit partnership with Apollo, while we continued to attract top talent to our firm.” – Jane Fraser, CEO.
Citigroup reported significant revenue growth across all business units, with notable increases in equities revenue by 32% and investment banking fees by 44%, reflecting strong market positioning and corporate optimism. Wealth management and US personal banking also saw revenue growth, indicating effective strategic enhancements and consumer base health. However, the company faced a 6% decline in fixed income revenues and an 8% decrease in retail banking revenues, pointing to market challenges and strategic realignment needs. Citigroup also highlighted a net income of $3.2 billion and a return of $2.1 billion in capital to shareholders, underscoring its financial stability and commitment to shareholder value. Additionally, the closing of a long-standing consent order and increased investment in regulatory compliance mark significant steps in its transformation efforts.
US Bancorp (USB)
Portfolio weight: 6.20%
EPS: $1.030 vs Bloomberg consensus of $0.991
Revenue: $6.864B vs Bloomberg consensus of $6.904B
“In the third quarter, we reported diluted earnings per share of $1.03 and a return on tangible common equity of 17.9%. Our expense levels decreased year-over-year which supported modest positive operating leverage, excluding net securities losses and prior year notable items. We expect positive operating leverage to expand in the fourth quarter and into 2025. Net interest income and margin increased on a linked quarter basis benefiting from loan mix, continued repricing of fixed rate earning assets and disciplined liability management. Primary fees categories including commercial products, trust and investment management, payment services and mortgage banking all increased year-over-year as we continue to focus on our diverse and unique business mix. Credit quality results were in line with expectations, and we continue to increase our capital position, ending the quarter with a CET1 capital ratio of 10.5%. We are committed to balancing capital growth through earnings accretion with capital distributions and expect to resume share buybacks in the near term. Finally, I would like to thank our dedicated employees for all they do to support our clients, communities, and shareholders.” – Andy Cecere, CEO.
U.S. Bancorp reported strong Q3 earnings with net revenue of $6.9 billion, driven by net interest income growth, fee business momentum, and expense discipline. The net interest margin expanded by seven basis points to 2.74%, reflecting effective asset and liability management. The company also showcased stable credit quality metrics and a strong capital and liquidity position, with the CET1 capital ratio increasing to 10.5%. Despite modest decreases in loans and deposits, U.S. Bancorp achieved double-digit year-over-year growth in several fee business areas. Full-year financial projections are optimistic, with net interest income expected at the higher end of the $16.1 to $16.4 billion range and disciplined expense management projected to keep non-interest expense at $16.8 billion.
PNC Financial Services Group (PNC)
Portfolio weight: 6.27%
EPS: $3.743vs Bloomberg consensus of $3.299
Revenue: $5.465B vs Bloomberg consensus of $5.396B
“Our results for the third quarter demonstrate PNC’s continued strong momentum across the franchise. NII and NIM both increased, fee revenue grew substantially and expenses remained well controlled, resulting in positive operating leverage. Importantly, we increased TBV, grew customers and continued to strengthen our capital levels. We remain well positioned to capitalize on opportunities and achieve record NII in 2025.” – Bill Demchak, CEO.
PNC Financial Services Group reported positive operating leverage for the third consecutive quarter, indicating efficient management and profitability with expectations to continue this trend into 2024. The company is on a trajectory towards record Net Interest Income in 2025, following a 3% growth in the third quarter. Despite challenges in the Commercial Real Estate office portfolio, including an increase in non-performing loans, PNC demonstrated strong overall financial performance with a solid third quarter net income of $1.5 billion or $3.49 per share. The company also highlighted stable credit quality and strengthened capital levels, with tangible book value per share increasing by 9%.
Truist Financial Corp (TFC)
Portfolio weight: 6.22%
EPS: $ 0.970 vs Bloomberg consensus of $ 0.908
Revenue: $ 5.140B vs Bloomberg consensus of $ 5.093B
“In the third quarter, we made considerable progress on driving revenue growth through our core banking business by adding new clients, deepening relationships, hiring and developing talented teammates, and investing in technology and infrastructure while maintaining strong expense discipline. Hurricanes Helene and Milton significantly affected teammates and clients in many communities Truist serves. We are working closely with those impacted by these disasters and are committed to help these communities rebuild. I am particularly proud of Truist teammates living our purpose, which has been on full display these past few weeks. Together, we will continue to deliver on our purpose and care for our clients, which fuel our momentum and growth.” – Bill Rogers, CEO.
Truist Financial Corporation reported a solid Q3 with a net income of $1.3 billion and an adjusted EPS of 97 cents, driven by strong investment banking and trading income. The company demonstrated expense discipline, leading to a projection of declining expenses in 2024 compared to 2023. A significant capital return to shareholders was highlighted by $1.2 billion through dividends and a $500 million stock repurchase. Digital growth was notable with a 35% increase in new to bank clients through digital channels. However, guidance for Q4 2024 anticipates a revenue decrease of 1.5% from Q3, with adjusted expenses expected to increase by 4%.
M&T Bank Corp (MTB)
Portfolio weight: 6.36%
EPS: $4.080 vs Bloomberg consensus of $3.642
Revenue: $2.332B vs Bloomberg consensus of $2.317B
“M&T’s positive earnings momentum, strong capital position and unyielding focus on delivering for our customers and the communities we serve have positioned the franchise for a strong finish to 2024. I am proud of how our employees have exhibited our core values as we execute on our strategic priorities.” – Daryl N. Bible, CFO.
M&T Bank Corporation reported a 10% increase in net income for Q3, highlighting strong operational performance. The bank has expanded its loan portfolio by nearly $2 billion, shifting focus from Commercial Real Estate to Commercial & Industrial and consumer loans, demonstrating proactive risk management. The Share Repurchase Program was resumed with $200 million in share repurchases, reflecting financial stability and commitment to shareholder value. Net Interest Margin grew to 3.62%, driven by effective loan growth strategies. The bank also reported improvements in asset quality, with a decrease in net charge-offs and non-accrual loans, indicating strong credit risk management.
First Citizens BancShares Inc (FCNCA)
Portfolio weight: 6.04%
EPS: $45.870 vs Bloomberg consensus of $47.556
Revenue: $2.270B vs Bloomberg consensus of $2.355B
“We posted another quarter of strong financial results, largely in line with our expectations. Loan growth remained resilient in both the General Bank and Commercial Bank segments, while loans in the SVB Commercial segment declined as Global Fund Banking repayment levels outpaced draw activity. We experienced another quarter of deposit growth, mostly concentrated in our Branch Network, with modest deposit growth in SVB Commercial. The stability of the SVB deposit franchise continues to demonstrate the competitive advantage we maintain in the innovation economy. Credit remained stable and our capital and liquidity positions remained strong. During the third quarter, we repurchased more than 350,000 shares of our Class A common shares for $700 million under the repurchase plan announced in July.” – Frank B. Holding, CEO.
First Citizens BancShares reported a positive performance in their rail segment with an increase in the number of railcars, indicating a strong and growing segment. However, the company experienced a sequential increase in noninterest expense by approximately 5%, primarily due to higher personnel costs and professional fees, and an elevated net charge off ratio, suggesting areas of financial pressure and concern. Despite these challenges, the company achieved its cost savings goal from the STB acquisition and expects slightly higher adjusted noninterest income in the fourth quarter, driven by strong rail segment performance and higher wealth management income. The outlook for net interest income is projected to decline due to anticipated rate cuts, with net charge offs in the fourth quarter expected to be near or slightly above the third quarter’s level.
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*Portfolio weights as at September 30, 2024. Figures in USD.
Source: Getty Images Credit: Javier Ghersi
