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Bank Earnings: One Big Takeaway from JPMorgan, Citi, Wells Fargo

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Analysts sometimes tout diversified banks that can move revenue exposure to businesses away from the yield curve. That thread of logic proved very valid Tuesday.

Here were the earnings:

JPMorgan reported revenue of $28.3 billion, beating estimates of $27.8 billion. Earnings per share was $2.57, beating estimates $2.35. Net interest income —

the amount of interest income minus amount of interest paid to lenders, was $4.3 billion, beating estimates of $14 billion. Markets revenue was $5 billion, up 56% year-over-year. CEO Jami Dimon mentioned this came against an easy comparable to the fourth quarter of 2018, when trading revenue suffered. Fixed-income revenue grew 86% to $3.4 billion.

The stock rose 1.065 to $137.20 a share.

Citigroup's revenue beat estimates, coming in at $18.4 billion versus $17.8 billion. EPS was $2.15, beating estimates of $1.81. Importantly, Citi ended the full year with return on tangible equity of 12.1%, against estimates of 11.5%. The bank has a long-term goal of getting towards 13%. The metric is next income as a percentage of book value and signifies how efficiently a bank leverages its assets.

Driving revenue the most was also trading revenue, as fixed-income trading revenue grew 49% to $2.9 billion.

The stock rose 0.87% to $81.35 a share.

Wells Fargo missed revenue and EPS estimates. 

Revenue was $1.9 billion, against estimates of $20 billion. Earnings per share was 60 cents, missing estimates of $1.12. The company said a larger than expected litigation expense related to deceptive consumer banking practices was a large part of the miss.

The stock fell 2.96% to $50.57.

The broader market, which likes to use banks lending activities as a barometer for the strength of the economy, was mixed Tuesday. The S&P 500 fell 0.01%, with the Dow Jones hovering between slightly up and slightly down. Net interest income and margins weren’t disappointing, but they did fall year-over-year.

For the banks themselves, JPMorgan and Citigroup put their diversification as businesses on display, with revenue and earnings growing, despite lending-related revenue and profit items suffering from lower interest rates.

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