Earnings season in the USA begins with positive surprises

Traditionally, the major US banks start the reporting season in the US, which is now underway. On Friday, October 13, 2023, no less than three major US banks presented their quarterly figures and consistently exceeded expectations. It is eagerly awaited whether the other sectors can keep up. Further positive surprises could support stock prices, which have recently suffered from fears of an expansion of the conflict in the Middle East.

The financial sector has recently benefited from higher interest rates. Citigroup, JP Morgan and Wells Fargo were able to exceed analysts' expectations. It was therefore not an "unfortunate" date for the publication of the highly anticipated figures.

JP Morgan posted third quarter earnings per share of USD 4.33 (expected USD 3.95), with all business units making significant contributions to the strong result. Only equity trading fell slightly short of analysts' expectations. Risk provisions were significantly lower than expected. According to statements by CEO Jamie Dimon, the US consumer continues to be keen to spend and demand for financing is also high despite geopolitical uncertainties.

Restructurings underway

Competitor Citigroup managed earnings per share of USD 1.63 (expected USD 1.21) and also achieved growth in all five main business lines (services, markets, corporate customers, asset management, US private customers). Fixed income trading grew particularly strongly (+14%). The reorganization of the five divisions announced by CEO Jane Fraser, while far from complete, is apparently bearing fruit ahead of schedule.

Wells Fargo's earnings per share came in at $1.48, well ahead of consensus expectations ($1.25). Net interest income beat analyst expectations and was boosted even further in the full-year preview.  Top priority according to CEO Charlie Scharf is now risk management and controlling costs.

The short-term outlook for US banks thus continues to look very encouraging. Looking further into the future, however, the outlook clouds over somewhat. Banks are already planning to allocate funds for staff reductions. In the longer term, the economy is expected to weaken, resulting in lower growth rates and higher loan losses.

This information is intended to provide a general overview of current market data and market developments, as well as Kathrein's market opinion, and does not contain any direct or indirect recommendation for a particular investment strategy in the sense of a financial analysis, or a recommendation to buy or sell financial instruments.
When investing in securities, price fluctuations due to market changes are possible at any time. Analysts' opinions, market opinions Data of the performance with reference to the past do not allow reliable conclusions to be drawn about future results.