You’ve Heard From The Best, Now Hear From The Rest

Goldman Sachs and JPMorgan Chase had a spectacular second quarter. But, not to put too fine a point on it, so what? What does that tell us, other than that Goldman and JPMorgan had a spectacular second quarter? Not much, frankly.

No, as ever, to get a real sense of how things are going, we have to go down a few rungs on the league tables to see if it was really a spectacular second quarter, or just a spectacular one for those for whom the spectacular isn’t spectacular but merely expected. Does a flood of released pandemic reserves really lift all boats? Dear reader, it does.

[Bank of America] posted earnings Wednesday of $9.22 billion in the second quarter, up from $3.53 billion a year earlier. The bank earned $1.03 a share, beating the 77 cents forecast by analysts polled by FactSet.

[Citigroup’s] earnings jumped after it released reserves set aside for loan losses, resulting in a $1.1 billion benefit after $1.3 billion in charge-offs. A year ago, the bank had been forced to set aside billions for expected credit losses, resulting in an $8.2 billion credit cost.

Both banks’ banner headlines were marred a bit by regrettable revenues—down year-and-year and, in BofA’s case, shy of estimates or, in Citi’s, just barely above them. The same, incredibly, could not be said for Wells Fargo, which offered the most sensational evidence for the aforementioned rising tide.

Revenue: $20.27 billion versus $17.77 billion expected, per Refinitiv estimates, reflecting a 10% increase compared with the same quarter one year ago

“Wells Fargo benefited from the continued economic recovery, strong markets that helped drive gains in our affiliated venture capital businesses, and our progress on improving efficiency, but the headwinds of low interest rates and tepid loan demand remained,” [CEO Charles] Scharf said in the earnings release…. The bank reported an efficiency ratio of 66% compared with the FactSet estimate of 76.1%, indicating that its operating expenses as a proportion to its revenues had improved from 80% in the June quarter of 2020.

Bank of America’s Profit More Than Doubles, but Revenue Takes a Hit [WSJ]
Citigroup beats analysts’ estimates for profit, helped by $1.1 billion boost from loans [CNBC]
Wells Fargo profit tops expectations with boost from release of money set aside for loan losses [CNBC]