US Stock Earnings Season Opens: Wells Fargo Q2 Net Interest Income Below Expectations, JP Morgan Net Profit Soars 25% YoY | Financial Report Insights

Entering the third year of a high-interest rate environment, the outlook for large commercial banks in the United States still faces headwinds. Fortunately, recent data pointing to a more optimistic rate cut expectation is expected to pave the way for a soft landing of the U.S. economy, ending the pain faced by the banking industry.

On Friday, July 12th, JPMorgan Chase, Citigroup, Wells Fargo, and other large commercial banks successively announced their performance, kicking off the second quarter earnings season for U.S. stocks.

JPMorgan Chase's Investment Banking Business Rebounds Significantly with a 25% Year-on-Year Increase in Net Profit

JPMorgan Chase, the largest commercial bank in the United States, announced before the market opened that its second-quarter revenue exceeded analysts' expectations. More importantly, its investment banking revenue soared by 50% compared to the same period last year, indicating a recovery in trading activities.

The financial report shows that JPMorgan Chase's Q2 revenue was $50.99 billion, surpassing the market's expectation of $49.87 billion. Net interest income was $22.9 billion, earnings per share were $4.40, exceeding the market's expectation of $4.19, and net profit increased by 25% year-on-year to $18.15 billion.

During the quarter, JPMorgan Chase earned $2.3 billion in investment banking fees, approximately $300 million higher than StreetAccount's expectations, indicating a recovery in Wall Street trading activities.

CEO Jamie Dimon pointed out in the financial report that his company remains cautious about potential risks in the future, including higher-than-expected inflation and interest rates, although stock and bond valuations "reflect a fairly benign economic outlook."

Dimon stated:

"Geopolitical situations remain complex and may be the most dangerous since World War II, although the outcome and its impact on the global economy are still unknown... Some progress has been made in reducing inflation, but we still face multiple inflation factors: massive fiscal deficits, infrastructure needs, trade structural adjustments, and the world's remilitarization."

At the time of writing, JPMorgan Chase was down 1.5% in pre-market trading.

Wells Fargo's Q2 Net Interest Income Below Expectations, Net Charge-offs Higher Than Expected

Although Wells Fargo's Q2 profits and revenues exceeded Wall Street's expectations, the bank announced on Friday that its net interest income declined by 9%.

The financial report shows that Wells Fargo's Q2 revenue was $20.69 billion, exceeding the market's expectation of $20.29 billion. Earnings per share were $1.33, surpassing the market's expectation of $1.29. Q2 net profit decreased from $4.94 billion in the same period last year to $4.91 billion. Net charge-offs surged by 70.5% to $1.303 billion, higher than the market's expectation of $1.24 billion.

The bank achieved $11.92 billion in net interest income during the quarter, a 9% year-on-year decrease, lower than analysts' expectation of $12.12 billion. Net interest income is a key indicator of measuring a bank's lending income. Wells Fargo explained that the decline in net interest income was due to the impact of rising interest rates on financing costs

CEO Charlie Shaf stated in the financial report:

"We continue to see fee-based revenue growth offsetting the expected decline in net interest income... Our ongoing investments have enabled us to capitalize on market activities this quarter, delivering strong performance in investment advisory, trading, and investment banking fees."

The bank repurchased over $12 billion of common stock in the first half of 2024 and expects a 14% increase in dividends for the third quarter.

As of the time of writing, Wells Fargo Bank's pre-market trading is down over 5%