On Friday, Wells Fargo (WFC) and JPMorgan Chase (JPM) kicked off first-quarter reports from major banks. Wells Fargo hit, reporting better-than-expected earnings of $1.05 per share vs. the consensus of $0.96. JPMorgan disappointed: Profit totaled $1.28 per share against the $1.40 average target. JPMorgan's miss was particularly surprising given that the bank had beaten EPS consensus in 11 out of the past 13 quarters.
The Wells Fargo beat was due to the quarter's steady revenue growth to $20.8 billion. As a broader-based commercial and retail bank, Wells Fargo was able to grind out top-line growth from its large consumer and corporate banks through loan growth, deposit fees, investment-banking transactions and brokerage services. This combined with falling expenses and credit ratios, and all of it allowed the bank beat the Street's view. Wells Fargo was also able to navigate the difficult current mortgage environment better than JPMorgan, as it is more exposed to purchasing money mortgages, and has less exposure to refinancing.
JPMorgan, on the other hand, missed the consensus number due to its more cyclical investment-banking and mortgage-origination businesses, which disappointed. The steep declines in those units led to an overall revenue decline to $23.9 billion, missing the $24.5 billion consensus estimate.
This revenue shortfall directly led to the missed earnings amid a deleveraged the expense base. The retail, commercial and asset-management sides of the bank all reported good numbers, and JPMorgan continued to gain market share outside of its mortgage business. We don't expect the numbers to get worse from here, and this is a rare miss for JPMorgan, which has consistently beaten estimates over the past four years.