Q3 Earnings Season Starts Strong For Banks As High Interest Rates Fuel Profits Bonanza

Benzinga - by Piero Cingari, Benzinga Staff Writer.

U.S. financial institutions kicked off earnings season on a robust note, surpassing analysts’ expectations for their third-quarter earnings per share.

• JP Morgan Chase & Co. (NYSE:JPM) announced earnings per share (EPS) of $4.33, surpassing the consensus estimate of $3.96. Additionally, the largest U.S. bank reported third-quarter revenue of $39.87 billion, slightly exceeding the expected $39.63 billion.

• Wells Fargo & Co (NYSE:WFC) disclosed an EPS of $1.48 in the previous quarter, exceeding estimates by almost 20%, which were at $1.242. Furthermore, the company reported revenue of $20.857 billion, surpassing the expected $20.086 billion.

• Citigroup Inc (NYSE:C) reported an EPS of $1.63 last quarter, far outpacing Street’s estimates at $1.227 by a 33% margin. The company announced revenue of $20.139 billion, beating the expected $19.272 billion.

• BlackRock Inc. (NYSE:BLK) saw its EPS sharply beating the Street consensus ($10.91 vs $8.34), while revenue came in at $4.522 billion, marginally lower than expected by $1.468 million.

• PNC Financial Services Group, Inc. (NYSE:PNC) released an EPS of $3.60 in the third quarter, beating the expected $3.104. Revenue disappointed, coming in at $5.233 billion against the predicted $5.319 billion.

• The Progressive Corp. (NYSE:PGR) announced an EPS of $1.74 in the third quarter, slightly above the $1.718 forecasted by analysts. On the revenue front, the insurance company reported $15.594 billion, surpassing estimates of $15.4 billion.

Market Reactions

The Progressive Corp. was the best-performing stock among financials on Friday, rallying more than 7%. For the insurance Titan this session marks the second-best one for 2023.

Wells Fargo rose nearly 4%, while JP Morgan rose 3%. Citigroup edged 2.2% higher, while BlackRock was flat for the day.

PNC Financial Services Group saw the steepest daily drop within the sector, down 2.9%.

Analyst’s Take On Q3 Bank Earnings

Additionally, the company upgraded its NII guidance, lowered its expense guidance and achieved a core return on tangible common equity (ROTCE) of 24.2% for the quarter, surpassing both Street expectations by 310 basis points and management’s medium-term ROTCE guidance by 720 basis points, standing at 17%.

Goldman Sachs anticipated the investor reaction to Wells Fargo‘s results would be predominantly positive. This outlook was based on the fact the core pre-provision net revenue (PPNR) of $8.2 billion exceeded Street expectations by 3%. The company also raised its 2023 net interest income (NII) guidance from year-over-year growth of +14% to +16%.

It’s worth noting that while this increase was largely anticipated, it was somewhat mitigated by a $0.5 billion uptick in the 2023 expense guidance.

Citi reaffirmed its previous guidance for 2023 revenue and expenses. However, the company updated its net interest income (NII) guidance, shifting it from a range of $46 billion or more (excluding Markets) to a range of $46 billion to $47.5 billion (excluding Markets).

Goldman Sachs believed the market would perceive these results as exceeding expectations and the adjustment in NII revenue guidance as a positive development, indicating an improved revenue composition.

Read Now: JPMorgan Q3 Earnings Beat: Robust Consumer & Community Banking, Credit Losses Dip, Outlook Revised & More

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