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Shares of JPMorgan Chase, Wells Fargo diverge after earnings
NEW YORK, April 13, 2019 (BSS/AFP) – JPMorgan Chase reported bumper
results on Friday and touted a still-solid US economy, while Wells Fargo
slashed a key profit benchmark, sending its shares sharply lower.
JPMorgan notched a rise in first-quarter profits following a strong
performance in the consumer and community banking division, the bank’s
biggest segment by revenues.
A key factor was increased net interest income, which measures the bank’s
ability to make money through its mix of lending products and paying interest
on deposits.
Net income was $9.2 billion, up 5.4 percent from the year-ago period.
Revenues were $29.9 billion, up 4.7 percent.
JPMorgan’s news release included positive commentary on the US economy,
although the bank did boost its provisions for credit losses following
downgrades on some commercial and industrial clients.
Chief Financial Officer Marianne Lake described the downgrades as
scattered among a “handful of names” and not reflective of a broader
deterioration in the US economy.
Chief Executive Jamie Dimon touted “record” revenues and net income in the
first quarter in a statement.
“Even amid some global geopolitical uncertainty, the US economy continues
to grow, employment and wages are going up, inflation is moderate, financial
markets are healthy and consumer and business confidence remains strong,” he
said.
JPMorgan shares were up 4.7 percent at $111.17 in early-afternoon trading.
Bank of America, Citigroup and other large banks that report next week also
rose.
Shares of Wells Fargo initially climbed after the bank reported better-
than-expected results but faltered as the market digested executive comments
on a conference call.
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– Weaker outlook –
The downcast remarks were the latest trouble sign at Wells Fargo, which
has suffered a number of setbacks over the last two and a half years
beginning with a fake accounts scandal that surfaced in September 2016.
Chief Financial Officer John Shrewsbury cut the full-year forecast for net
interest income, citing a lower outlook on interest rates and competitive
pressures that have challenged profitability in lending and taking deposits.
The bank had previously projected a 2019 range of between down two percent
and up two percent for net interest income. Wells Fargo now projects a
decline of between two and five percent.
Among the factors, Shrewsbury said promotional high-yield certificates of
deposit and other savings products for savers were costing the bank more than
they had been.
Several analysts also probed the company’s regulatory travails, which have
included unusual public criticism from the Federal Reserve and other bodies.
Acting Chief Executive Allen Parker said the bank was working hard to win
back trust of regulators.
“I would say the feedback that we have heard is really not directed to any
line of business. It’s really our larger corporate functioning in terms of
our control system and framework for risk management,” Parker told analysts.
The bank will approach the work “with the appropriate level of urgency but
we’re not going to prioritize urgency over getting it right,” he added.
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