On the 14th local time, four major U.S. banks including JPMorgan Chase , Morgan Stanley , Wells Fargo and Citi all released the results, opening the prelude to the third quarter financial report season. During the period 0, Wall Street major behaviors made provisions for bad debts to deal with the risk of recession. investment banking business declined, and securities investment failed. The above factors dragged down the net profit of the four major banks by 17% to 31% compared with the same period last year. However, benefiting from the sharp rise in interest rates, net interest income became the highlight of performance.
Specifically, JPMorgan Chase's revenue in the third quarter recorded US$33.49 billion, increased by 10% year-on-year, leading the four major banks in revenue growth, and net profit fell 17% to US$9.74 billion. In terms of asset size, JPMorgan Chase is the largest bank in the United States. During the same period, Morgan Stanley achieved revenue of US$12.99 billion, a year-on-year decrease of 12%, making it the only major bank among the four major banks to experience a decline in revenue, with net profit of US$2.63 billion, a year-on-year decrease of 29%. Citibank revenue rose 6% to US$18.51 billion, and net profit was US$3.48 billion, down 25% from the same period last year. Wells Fargo recorded revenue of $19.51 billion, a year-on-year increase of 4%, and net profit fell sharply by 31% to $3.53 billion.
Net interest income has achieved double-digit growth
At this stage, rising interest rates and high inflation allow banks to charge more loan interest to enterprises and retail customers. Moreover, given that the unemployment rate remains at a low level, there has been no significant change in the repayment ability of enterprises and consumers, and the profits of banks' core credit business have risen. In the third quarter, JPMorgan Chase, Citigroup and Wells Fargo all achieved double-digit growth in net interest income.
Among them, JPMorgan Chase's net interest income was US$17.6 billion, a quarterly high, a surge of 34% from the same period last year. net interest margin rose from 1.8% in the second quarter to 2.09%; Citibank's net interest income was US$12.6 billion, an increase of 18% year-on-year; Wells Fargo's net interest income increased by 36% to US$12.1 billion. Compared with the other three major banks, Wells Fargo focuses more on retail and commercial banking businesses, so it is regarded as one of the biggest beneficiaries of the Federal Reserve's interest rate hikes in .
Wells Fargo CEO Charlie Scharf said that its retail and corporate customers have good financial conditions, credit quality remains stable, loan default rates are at historical lows, and repayment rates are at highs, and rising interest rates drive strong growth in net interest income.
However, as the largest bank that relies on mortgage business among the six major banks, as the average interest rate of 30-year mortgage loans approaches a 20-year high of 7%, home sales and refinancing activities have plummeted, Wells Fargo's mortgage business has also begun to be under pressure, dragging down the bank's overall profit margin.
New bad debt provisions to cope with the recession
Senior analyst Joshua Warner told First Financial that although rising interest rates and resilience in the employment market are all positive factors, However, the banking industry is also facing the risk of increasing non-performing loans after the epidemic. Therefore, began to set aside reserves and announced a larger write-down to cope with Feder 's determination to continue to aggressively raise rate hikes and the possibility of an economic recession, which has also become the main factor dragging down profit growth.
JPMorgan made $810 million in bad debt provisions last quarter, while in the same period last year, the bank released $2.1 billion in bad debt provisions. The bank CEO Dimone (Jamie Dimon) said on an investor call that if the U.S. unemployment rate rises to 5% to 6%, the bank may have to add new credit loss reserves of $5 billion to $6 billion in the next few quarters. "Major headwinds are right in front of us. Stubborn inflation forces global interest rates to rise in the same department, the quantitative tightening effect is unknown, the situation in Russia and Ukraine has exacerbated the risk of geopolitical risks, and oil supply and oil prices are fragile. Although we have hope, we need to always be cautious and prepare for bad results," said Dimon.
The other three major banks took the same measures. Morgan Stanley added $35 million in bad debt provision last quarter; Citi set aside $370 million in reserves for credit losses, and released $1 billion in bad debt provision in the same period last year; Wells Fargo added $780 million in bad debt provision, and released $1.4 billion in bad debt provision in the same period last year.
investment banking business suffered a heavy blow
macro environment deteriorated, new stock market was sluggish, and stock market bond markets were weak, which was very different from the hot market last year, causing major banks' investment banking business to suffer heavy blows. Warner explained that the uncertain economic outlook has prompted most IPO companies to postpone or cancel their listing plans. In addition, tightening financing conditions have also hit corporate willingness to acquire companies, and Wall Street's investment banking business has been deeply affected.
investment banking business is one of JPMorgan’s largest business segments, with investment banking revenue falling 43% to US$1.7 billion in the third quarter. Although the surge in the US dollar has enhanced the attractiveness of international mergers and acquisitions, global mergers and acquisitions activity has dropped sharply due to more cautious American companies, resulting in a sharp decline in the bank's consulting and underwriting revenue from mergers and acquisitions and listings.
, coincidentally, Morgan Stanley's investment banking business revenue dropped by 55% year-on-year to US$1.28 billion, and Citi Investment Bank's revenue dropped by 64% to US$630 million.
bank stocks performed differently this year. JPMorgan Chase led the decline in the four major banks, with a cumulative decline of 30% year-to-date; Citi followed closely with a drop of 28%; Morgan Stanley fell by 23%; Wells Fargo had the smallest decline, with a cumulative decline of 10% year-to-date. During the same period, the S&P 500 index fell by 25%.
