Earnings Preview

Welcome to this week’s newsletter! With Q4 earnings season approaching, we take a closer look at some of the financial sector’s most prominent players, including JPMorgan Chase, Wells Fargo, BlackRock, Citigroup, Bank of America, and Morgan Stanley.

This edition highlights the key areas to watch as these companies release their results, including potential developments in wealth management, asset growth, investment banking activity, and cost management. We also examine how ongoing economic trends, such as rising interest rates and evolving credit markets, might influence their performance.

Dive into our analysis of these industry leaders as they prepare to share their final results for FY2024.

JPMorgan Chase & Co. (JPM)

Category: Financial Services

JPMorgan Chase reported strong Q3 FY2024 results, driven by robust performance across its core banking, credit, and investment operations. Total revenue for the quarter reached $40.8 billion, up 13% year-over-year, supported by higher net interest income, which grew 22% YoY to $19.3 billion, benefiting from higher interest rates and loan growth. Noninterest income increased 6% YoY, reflecting strength in investment banking fees and trading activity.

Net income rose 11% YoY to $13.3 billion, translating to $4.80 per share, exceeding analysts’ expectations. The bank’s efficiency ratio improved slightly to 55%, highlighting disciplined cost management. Total loans increased by 5% YoY, while deposits grew modestly by 2%, underscoring continued customer trust and engagement.

Key Points:

• Total Revenue: $40.8 billion, up 13% YoY.

• Net Interest Income: $19.3 billion, up 22% YoY.

• Net Income: $13.3 billion, or $4.80 per share, up 11% YoY.

• Efficiency Ratio: 55%, reflecting operational discipline.

• Loan Growth: 5% YoY; Deposit Growth: 2% YoY.

Projections for Q4 FY2024:

• Revenue Guidance: JPMorgan expects net interest income to remain strong, projected at $19.0-$19.5 billion, driven by sustained loan growth and high interest rates.

• Loan Growth: Continued expansion in commercial lending and credit card portfolios is anticipated.

• Investment Banking Outlook: Expected to benefit from improving capital markets and higher deal-making activity.

JPMorgan Chase’s strategic focus on expanding its digital offerings, enhancing operational efficiencies, and maintaining strong capital buffers positions the bank for continued resilience in a dynamic economic environment. Analysts will be closely monitoring credit quality metrics and loan performance amid shifting macroeconomic conditions.

Wells Fargo & Co. (WFC)

Category: Financial Services

Wells Fargo posted strong Q3 FY2024 results, driven by higher net interest income and improved efficiency in its operations. Total revenue for the quarter reached $20.5 billion, a 7% year-over-year increase, reflecting the benefits of rising interest rates and disciplined expense management. Net interest income (NII) grew 12% YoY to $13.1 billion, bolstered by loan growth and a favorable interest rate environment.

Net income rose 17% YoY to $5.2 billion, translating to $1.47 per share, exceeding analyst expectations. Wells Fargo’s efficiency ratio improved to 64%, compared to 67% in the prior-year quarter, highlighting progress in managing operating expenses. Consumer loans grew by 4% YoY, driven by strength in auto and personal lending, while deposits declined modestly by 2%, reflecting shifts in customer liquidity preferences.

Key Points:

• Total Revenue: $20.5 billion, up 7% YoY.

• Net Interest Income (NII): $13.1 billion, up 12% YoY.

• Net Income: $5.2 billion, or $1.47 per share, up 17% YoY.

• Efficiency Ratio: 64%, reflecting disciplined cost management.

• Loan Growth: Consumer loans up 4% YoY; Deposits down 2% YoY.

Projections for Q4 FY2024:

• Revenue Guidance: Wells Fargo expects continued NII strength, supported by higher interest rates and loan demand, with total revenue anticipated to grow in the mid-single digits YoY.

• Loan Growth: Anticipated to remain steady, particularly in consumer and small business lending segments.

• Expense Management: Continued focus on operational efficiencies, targeting further improvements in the efficiency ratio.

Wells Fargo’s strategic efforts to streamline operations and expand its consumer lending portfolio position it well for sustained performance. Analysts will be closely watching the bank’s progress in managing deposit trends and navigating the macroeconomic environment.

BlackRock, Inc. (BLK)

Category: Financial Services & Asset Management

BlackRock delivered solid Q3 FY2024 results, with total revenue of $5.3 billion, up 7% year-over-year, driven by continued growth in its technology services and long-term investment products. The firm’s assets under management (AUM) reached $10.1 trillion, reflecting a 9% YoY increase, supported by strong market performance and net inflows of $98 billion during the quarter. The Technology Services segment, which includes Aladdin, grew 14% YoY, highlighting ongoing demand for portfolio management solutions.

Net income for the quarter rose to $1.6 billion, a 10% YoY increase, translating to diluted earnings per share (EPS) of $11.78, exceeding expectations. Operating margin remained strong at 42.5%, reflecting disciplined expense management and operating leverage.

Key Points:

• Total Revenue: $5.3 billion, up 7% YoY.

• AUM: $10.1 trillion, up 9% YoY.

• Net Inflows: $98 billion during the quarter.

• Technology Services Growth: +14% YoY.

• Net Income: $1.6 billion, or $11.78 per diluted share, up 10% YoY.

• Operating Margin: 42.5%.

Projections for Q4 FY2024:

• Revenue Guidance: BlackRock expects continued growth in long-term investment products and technology services, with revenue projected to grow in the mid-single digits YoY.

• AUM Outlook: Anticipated to remain strong, supported by favorable market trends and continued client inflows.

• Drivers: Expansion of Aladdin's adoption across global asset managers and demand for sustainable investment products will remain key growth levers.

BlackRock’s ability to sustain AUM growth and expand its technology offerings positions it well to navigate a dynamic market environment. Analysts will focus on how BlackRock leverages its scale and technology leadership to drive further profitability.

Citigroup Inc. (NYSE: C)

Category: Financial Services

Citigroup reported third-quarter 2024 revenues of $20.3 billion, a 1% increase compared to the same period in 2023. Adjusted for divestitures, revenues were up 3%, driven by growth across all core businesses, including Services, Markets, Banking, and Wealth Management. However, net income declined by 9% to $3.2 billion due to higher credit costs.

Key highlights from Q3 2024:

• Positive revenue contributions from Services, which delivered a record quarter, and Wealth Management with a 9% growth.

• Investment Banking revenue grew 31%, benefiting from investment-grade debt issuance.

• Markets revenue increased, with Equity Markets up 32% on strong growth in derivatives and cash equity volumes.

Citigroup’s cost of credit surged 45% year-over-year to $2.7 billion, primarily due to higher net credit losses and a build-up of allowances for credit losses. Despite these challenges, the bank remains committed to its strategic transformation, including organizational simplification and risk management improvements.

Upcoming Earnings Expectations

As Citigroup heads into its Q4 2024 earnings release, investors will focus on:

1. Transformation Progress: Updates on expense reductions and efficiency gains, with management targeting a continued decline in operating expenses after achieving a 2% reduction in Q3.

2. Wealth Management Growth: Expansion in client investment assets and fee revenue will be critical to sustaining momentum in this high-margin business.

3. Credit Quality: Investors will scrutinize trends in credit costs, particularly within U.S. Personal Banking, where higher net credit losses have weighed on profitability.

4. Equities and Investment Banking: Strong equity markets performance and elevated debt issuance could provide an upside surprise.

Projection for Q4 2024

Given the momentum in its Wealth Management, Services, and Equity Markets divisions, Citigroup is likely to report solid revenue growth in Q4. However, the impact of rising credit costs and macroeconomic uncertainties may dampen net income growth. With its diversified revenue streams and ongoing transformation initiatives, Citigroup is hoping to position itself to close 2024 on a strong note.

Bank of America Corporation (BAC)

Category: Financial Services

Bank of America reported steady Q3 FY2024 results, showcasing resilience despite a challenging macroeconomic environment. Total revenue for the quarter was $25.2 billion, up 2% year-over-year, driven by higher net interest income (NII), which grew by 4% YoY to $14.4 billion, as a result of higher interest rates and strong loan growth. Noninterest income remained flat, with modest gains in investment banking offset by weaker performance in wealth management.

Net income for the quarter stood at $7.4 billion, up 3% YoY, or $0.89 per share, in line with analyst expectations. The bank's efficiency ratio improved slightly to 65%, reflecting disciplined cost management. Deposits declined by 1% YoY but showed stabilization sequentially, while loans grew 5% YoY, led by strength in commercial lending and consumer mortgages.

Key Points:

• Total Revenue: $25.2 billion, up 2% YoY.

• Net Interest Income: $14.4 billion, up 4% YoY.

• Net Income: $7.4 billion, or $0.89 per share, up 3% YoY.

• Efficiency Ratio: Improved to 65%.

• Loan Growth: Up 5% YoY; Deposits declined 1% YoY.

Projections for Q4 FY2024:

• Revenue Guidance: Bank of America expects total revenue growth in the low-single digits, supported by steady NII and improving investment banking activity.

• Loan Growth: Anticipated to remain stable, with strength in commercial and consumer portfolios.

• Expense Management: Continued focus on cost efficiency, with the aim to maintain or slightly improve the efficiency ratio.

Bank of America’s ability to sustain loan growth and manage interest rate dynamics positions it for consistent performance. Analysts will be watching credit quality metrics and deposit trends closely as the bank navigates a dynamic macroeconomic environment.

Morgan Stanley (MS)

Category: Financial Services & Investment Banking

Morgan Stanley delivered solid Q3 FY2024 results, with total revenue of $14.8 billion, up 6% year-over-year, driven by strong performance in Wealth Management and Equity Trading. Wealth Management revenue grew 11% YoY to $6.7 billion, supported by record net new assets of $65 billion during the quarter and a 10% increase in net interest income. Investment Banking revenue rebounded with 15% YoY growth, reflecting improved underwriting activity and increased advisory fees.

Net income was $3.3 billion, or $2.05 per share, compared to $2.9 billion, or $1.88 per share, in the prior-year quarter. The firm’s efficiency ratio improved to 68%, supported by disciplined expense management. Morgan Stanley’s asset management business also contributed positively, with total assets under management (AUM) increasing to $1.6 trillion, a 9% YoY growth.

Key Points:

• Total Revenue: $14.8 billion, up 6% YoY.

• Wealth Management Revenue: $6.7 billion, up 11% YoY.

• Investment Banking Revenue: +15% YoY.

• Net Income: $3.3 billion, or $2.05 per share, up 14% YoY.

• AUM: $1.6 trillion, up 9% YoY.

• Efficiency Ratio: Improved to 68%.

Projections for Q4 FY2024:

• Revenue Guidance: Morgan Stanley expects Q4 revenue to benefit from sustained strength in Wealth Management and a continued rebound in Investment Banking, with mid-single-digit growth anticipated.

• Investment Banking Activity: Increased deal-making and underwriting are expected to drive further revenue growth.

• Drivers: Growth in fee-based accounts, higher net interest income, and expanding advisory mandates in Wealth Management.

Morgan Stanley’s diversified revenue streams and strategic focus on Wealth Management and Investment Banking position it for steady growth. Analysts will closely monitor the firm’s ability to navigate macroeconomic uncertainties and capitalize on improving market conditions.

Conclusion: Preparing for Q4 FY2024 Earnings

As we await the Q4 FY2024 results, the financial sector remains a focal point for understanding broader market trends and economic conditions. Themes such as interest rate impacts, credit quality, and shifts in client preferences continue to influence strategies across the industry.

With upcoming earnings releases, we’ll gain valuable insights into how firms like Morgan Stanley, BlackRock, and Citigroup are progressing with their strategic initiatives and adapting to the evolving market landscape. Stay tuned as we cover the key takeaways in future editions.