Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
After continuously revised jobs data in the downward direction, leading to 818,000 fewer jobs (trailing 12 months up to March 2024) than originally reported, the trust in official figures has waned. Some studies have suggested that the US has actually been in recession since 2022.
Case in point, economists EJ Antoni and Peter St. Onge made the case that because cumulative inflation has been understated by ~15% since 2019, the adjusted real GDP growth decreased by 2.5% instead of having increased by 13.7% between Q1 2019 and Q2 2024.
But what does the earnings data say for three major financial institutions in their latest Q3 report released on Friday? Year-to-date, S&P Banks Select Industry Index yielded 14.02% returns vs S&P 500 Index itself at 22% gains.
In which direction do earnings for JPMorgan Chase (NYSE: JPM), Wells Fargo (NYSE: WFC) and BlackRock (NYSE: BLK) point to?
JP Morgan Chase & Co. (NYSE: JPM)
As a globally systemically important bank (G-SIB) and the largest US bank, JPMorgan’s net income dropped by 2% from $13.2 billion in the year-ago quarter to $12.9 billion. The bank more than doubled the coverage for bad loans, from $1.4 billion to $3.1 billion.
Nonetheless, JPMorgan’s revenue increased by $2.6 billion from the year-ago quarter, to a total of $43.3 billion. Moreover, the bank exceeded FactSet’s estimate for net interest income of $22.9 billion to $23.5 billion, representing a 3% increase.
Overall, due to lower count of outstanding shares in Q3, JPMorgan beat the Wall Street earnings per share forecast of $3.99 at $4.37 per share. Accordingly, JPM stock rose 5.33% over the week, now priced at $222.56 against the 52-week average of $186.97 per share.
Year-to-date, JPM stock more than doubled the performance of the S&P Banks Select Industry Index, having yielded 29.42% returns. According to Nasdaq’s forecasting data based on 24 analysts, the average JPM price target twelve months ahead is close to its current price, at $225.64 per share.
Join our Telegram group and never miss a breaking story.
Wells Fargo & Company (NYSE: WFC)
As the third largest US bank, Wells Fargo reported an 11.3% decrease in net income, from $5.76 billion in the year-ago quarter to $5.11 billion. The bank’s net interest income also dropped by 10.8%, from $13.1 billion to $11.7 billion.
Overall, the bank’s total revenue decreased by 5% to $9.12 billion. Notably, both auto and personal loans are significantly down, at 24% and 7% YoY respectively. But just as is the case with JPM, Wells Fargo exceeded the earnings per share estimate (Zacks Consensus) of $1.27 at $1.52 per share, constituting a positive 19.69% surprise.
Equally so, WFC stock is up 8% over the week to present price of $61.53 against the 52-week average of $53.42 per share. Based on 21 analysts, the average WFC price target is above the current price at $64.09, while close to its low estimate of $59 per share.
BlackRock, Inc. (NYSE: BLK)
The world’s largest asset manager that helped the Federal Reserve to navigate through 2020 market shock reported 15% increase in YoY revenue to $5.2 billion. Having accumulated record $221 billion quarterly net inflows, BlackRock increased its assets under management (AuM) by $2.4 trillion YoY to a total of $11.5 trillion.
However, BlackRock’s net profits only increased by 2% to $1.63 billion. Due to heavy operational costs, this means that Tether stablecoin company still far exceeds BlackRock’s profitability. Last year, Tether made $6.2 billion compared to BlackRock’s $5.5 billion.
Given Zacks Consensus for $10.42 earnings per share, BlackRock too beat the estimate at $11.46 per share, constituting positive earnings surprise for four consecutive quarters. Over the week, BLK stock is up 3.24% to current price of 984.415 per share.
Based on 16 analysts pulled by Nasdaq, the average BLK price target is $1000.35 against the 52-week average of $797.50 per share.
Bottom Line
In conclusion, major financial institutions have beaten earnings expectations. However, more defaults are expected, and their net income has either stagnated or decreased. In other words, beating low analyst estimates may look good on paper, but this doesn’t reflect the economy’s health.
Aligned with the aforementioned study showing multi-year recession, it also bears keeping in mind that national personal saving rate has been under the 2020 level since the end of 2021. Moreover, the Biden admin increased government worker pool to such an extent that they accounted for 85% increase in total payrolls according to BLS’ household survey data.
Without this driver, the unemployment rate would be much higher than the currently reported one at 4.1% for September. Once again, this shows that official data should be taken with a grain of salt.
Do you think jobs data will suffer further significant revisions? Let us know in the comments below.
Disclaimer: The author does not hold or have a position in any securities discussed in the article.
The post Today’s Big Earnings Results Summarized: BLK, JPM, and WFC appeared first on Tokenist.