US quarterly reporting season heats up

By Glenn Dyer | More Articles by Glenn Dyer

The US March quarter reporting season accelerates this week with three more banks and Netflix down to be the most watched filers.

The trio of big banks reporting this week are Bank of America, Goldman Sachs, and Morgan Stanley – which is reported to be facing increasing scrutiny from US regulators over some of its clients in its growth business – wealth management.

They will follow JPMorgan Chase, Wells Fargo, and Citi, which failed to impress investors on Friday with their quarterlies.

That saw JPMorgan shares slide 6.5%, Citigroup shares drop more than 1.7%, and Wells Fargo shares sagged 0.4% after holding up for most of the session.

In fact, it was the whining about the outlook that grabbed the most attention on Friday, but that played into the slump in momentum and investor confidence on the day that capped the worst week for shares since October.

Friday’s trio warned of an “uncertain” year ahead after mixed financial results during the first quarter in an environment of stubbornly high inflation and geopolitical clashes in Europe, the Middle East, and elsewhere. JPMorgan reported a modest 6% rise in profits Friday while profits at Wells Fargo and Citigroup fell, though both topped Wall Street expectations.

“Many economic indicators continue to be favorable. However, looking ahead, we remain alert to a number of significant uncertain forces,” JPMorgan CEO Jamie Dimon said, citing the wars in Gaza and Ukraine as well as other geopolitical pressures, high levels of government spending across the world, and “persistent inflationary pressures.”

On call with reporters, Citigroup executives echoed Dimon’s comments. Mark Mason, Citi’s chief financial officer, said that while the bank still sees an economic soft landing — where inflation cools while keeping the economy growing — risks to the economy abound.

“The global economy seems to be resilient,” Mason said, but that the bank remains concerned about inflation and what will happen as interest rates remain elevated for a longer period of time.

The real story from the results is that the boom from rising rates is over as the banks warn their key profit generator – their net interest margins – are going to come under pressure this year, even if the Fed doesn’t cut rates.

JPMorgan, the nation’s largest bank, earned a profit of $US13.42 billion, compared with a profit of $US12.62 billion in the March quarter of 2023. JPMorgan’s results were pulled lower by a $US725 million one-time charge for an assessment by the Federal Deposit Insurance Corporation to replenish a bailout fund that helped the bank in 2023 in buying First Republic.

But the bank earned more money, unlike Wells Fargo and Citi.

JPMorgan fell more than 5% Friday after the bank released conservative full-year projections for net interest income. That forecast largely reflects the bank’s expectation that the Federal Reserve will cut interest rates later this year.

Wells Fargo (released from some big restrictions by regulators because it has improved its management) earned $US4.6 billion in the first quarter, less than the $US5 billion Wells earned in the same period a year ago.

Citigroup profits dropped 27% from a year earlier as the bank continues to restructure itself after selling off much of its international franchises and restructures after the pandemic.

Citi earned $US3.37 billion, compared with a profit of $US4.6 billion a year earlier.

So apart from Netflix and the trio of banks (Bank of America, Morgan Stanley, and Goldman Sachs), other companies reporting this week include Amex, Johnson & Johnson, ABB, ASML NV (the big Dutch chipmaking equipment maker), CSX the rail group, oil services giant and Russia remainder, Schlumberger, and Alcoa (which is wrapping up Alumina Ltd) and US trucking and logistics giant, JB Hunt."

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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