The key facts

  • JPMorgan Chase earned $15.3 billion in Q3 but for the first time in nearly three years missed analysts' forecasts ($5.57 versus the expected $5.93 per share)
  • Citigroup increased profit by 40%, while Wells Fargo and Goldman Sachs beat or delivered strong results
  • Banks warn of risks: high rates, inflation, budget deficits and geopolitics

Strong Earnings Kick Off the Season

The four largest US banks — JPMorgan Chase, Citigroup, Wells Fargo and Goldman Sachs — reported profit growth in the third quarter compared with a year earlier. According to Euronews, this was a new sign of the resilience of the American economy: consumers continue to pay down debt, and businesses are actively investing in artificial intelligence. Large banks traditionally kick off the quarterly earnings season, and this season is crucial for the stock market, as strong corporate profits have helped the S&P 500 set records. According to FactSet, analysts expect S&P 500 companies' earnings per share to grow by nearly 30% year over year — which would be the third consecutive quarter of growth above 25%.

JPMorgan: A Rare Miss

JPMorgan Chase, the largest US bank by assets, earned a profit of $15.3 billion, or $5.57 per share, versus $14.4 billion ($5.07 per share) a year earlier. However, the result fell below the Wall Street consensus forecast of $5.93 per share — the bank's first miss in nearly three years. The bank recorded losses on investment securities of $658 million and a 12% rise in expenses. Revenue from debt markets fell 4% year over year, although total markets revenue rose 15%. CEO Jamie Dimon said the US economy continues to be fueled by strong business investment and consumer spending, but that 'large budget deficits, persistent inflation, high asset prices, rising interest rates and a shifting geopolitical landscape continue to quietly change the situation.'

Goldman Sachs, Citigroup and Wells Fargo

Goldman Sachs increased its profit to $5.29 billion ($17.01 per share) from $4.1 billion ($12.25) a year earlier. Revenue from equities trading rose 72% year over year, but revenue from debt, currencies and commodities fell 24% compared with the second quarter. Citigroup reported a 40% year-over-year profit increase, beating Wall Street expectations: revenue from investment banking and wealth management grew, while profit from the credit cards division remained roughly flat. Wells Fargo earned a profit of $5.95 billion ($1.87 per share), beating forecasts; the bank has been steadily growing profit since regulators lifted the asset cap imposed nearly ten years ago following a sales-practices scandal.

Risks on the Horizon

Despite the strong results, banks warned about the long-term effect of elevated interest rates and possible pressure from rising prices on consumers if inflation cannot be tamed. Over the summer, the bond market saw significant volatility amid investor concerns about government spending and inflation: yields on 10-year and 30-year US Treasury bonds rose to levels not seen in many years. According to Euronews, rising prices for diesel fuel, technology and food gave the Federal Reserve reason to raise rates last month — despite pressure from the White House, which opposed policy tightening.