PaymentsJournal’s Post

Executives from several major banks, including U.S. Bank, Bank of America, and Wells Fargo, indicated concerns about the impact of high deposit costs on net interest income (NII) in 2024. Specifically, all three banks reported a decline in NII of 3.0% for the fourth quarter when compared to the previous quarter. Wells Fargo forecasted a reduction in NII of between 7.0% and 9.0% for the entirety of 2024 compared to 2023. However, banks also expressed some optimism for the latter half of 2024. U.S. Bank anticipates that four Fed Rate cuts in 2024 will lead to increased commercial loan demand and lower deposit costs, which could help stabilize margins and NII later in the year. https://lnkd.in/e-wNb6MP

The FHLB100 report is finally out and, as the newsletter reported in last month’s edition, the FHFA put pressure on the FHLBs to withhold new advances to a failing member and instead, to redirect the call to the Fed’s discount window. It also wants the FHLBs to improve their underwriting procedures, to look beyond just the bare requirement that members meet a positive TCE ratio for a loan. The FHFA also said it plans to propose to make the 10% residential mortgage exposure requirement, now just required at the time a bank applies for membership, an ongoing requirement. The average bank would handily meet an ongoing 10% resi mortgage requirement, but a minority of banks, most with assets below $10 billion, would not. The FHFA also said it would consider more mergers among the FHLBs along the lines of the merger between FHLB Des Moines and Seattle in 2015. In other news, bank treasurers report that liquidity is back to normal, but that they are no clearer today where the Fed is headed than they were the month before, or the month before that. Maybe the Fed is done, but who knows, it would not be crazy to see rates go up another 100 basis points from here. So, should bank treasurers be trying to restructure their underwater bond portfolios now or wait? Hard to say, but not surprisingly, bank treasurers want to hedge for all outcomes. https://lnkd.in/ebQKsjtR

🏦Earnings from the largest banks fell in the first quarter but largely were in line with or beat analysts’ expectations. Revenue growth remains muted but is slightly higher than the last quarter of 2023. Aggregate earnings for the four banks fell by 7.4% from the first quarter of 2023. The drop was largest for Citigroup, with expenses from restructuring offsetting revenue gains. Total revenues for the four banks rose by 2.4% from Q1 2023, falling quarter-over-quarter. Read Trepp, Inc.'s Q1 2024 Bank Earnings Review: https://hubs.li/Q02tdg-l0 #Trepp #Banking #BankEarnings #JPMorgan #Citi #WellsFargo #BankofAmerica #TreppBankData

The FHLB100 report is finally out and, as the newsletter reported in last month’s edition, the FHFA put pressure on the FHLBs to withhold new advances to a failing member and instead, to redirect the call to the Fed’s discount window. It also wants the FHLBs to improve their underwriting procedures, to look beyond just the bare requirement that members meet a positive TCE ratio for a loan. The FHFA also said it plans to propose to make the 10% residential mortgage exposure requirement, now just required at the time a bank applies for membership, an ongoing requirement. The average bank would handily meet an ongoing 10% resi mortgage requirement, but a minority of banks, most with assets below $10 billion, would not. The FHFA also said it would consider more mergers among the FHLBs along the lines of the merger between FHLB Des Moines and Seattle in 2015. In other news, bank treasurers report that liquidity is back to normal, but that they are no clearer today where the Fed is headed than they were the month before, or the month before that. Maybe the Fed is done, but who knows, it would not be crazy to see rates go up another 100 basis points from here. So, should bank treasurers be trying to restructure their underwater bond portfolios now or wait? Hard to say, but not surprisingly, bank treasurers want to hedge for all outcomes.  https://lnkd.in/er-U5msK

Are we almost through the woods in terms of deposits? Costs have stabilized and look like they're starting to go down. The environment is less competitive than it was previously. Has loan demand stalled? Or has it been tamped down? Probably a little bit of both, mortgages have obviously stalled due to high rates. However, a lot of other loan types have been slowed through credit tightening or because they aren't currently attractive products to be in (I'm looking at you office CRE). Either way, the golden age of getting 5%+ on just about any deposit product looks to be coming to an end. This is good for margins, and hopefully it won't meaningfully impact liquidity. There will still obviously be good deals out there for those willing to look around, but technically they've always been there. However, those longer term, high rate CDs are probably becoming a thing of the recent past. "The drag on bank profits from higher interest rates seems close to abating, as the industry looks to slash payouts to depositors when the Federal Reserve cuts rates." "After years of getting paid very little on deposits, consumers and businesses had finally gotten the upper hand as banks fought over their cash during the last two years. With loan demand somewhat stalled, banks don't need as much cash to fund their growth and are competing a bit less to bring in deposits." "Some early signs of deposit-cost relief were evident a few months ago, when online-only banks such as Ally Financial, Discover Financial Services and Goldman Sachs' Marcus made small cuts to the high-yield savings accounts they offer." "The average rate that banks are paying on new CDs dropped from 4.9% last year to 4.75% at the end of June, according to data from hundreds of banks and credit unions that Darling Consulting works with." "Some banks may still have to pay up for deposits if they are short on cash or looking to expand, even though softer loan demand has made growth harder. The Fed is also sticking with plans to unwind its $7.2 trillion balance sheet, which gradually pulls money from the financial system and thus extinguishes deposits." "The so-called mix shift in deposits also seems to be getting better. As interest rates rose, consumers moved money away from accounts that paid no interest toward those that did." #deposits #rates #interest #banks #creditunions

🚨🇺🇸 JUST IN...Q2 US MAJOR BANKS EARNINGS : Wells Fargo & Co. sank after warning it won’t be able to whittle away costs as fast as forecast amid higher-than-expected expenses. JPMorgan Chase & Co.fluctuated after reporting record profit — while missing on a few key metrics, like net interest income. Citigroup Inc.climbed as equity trading beat estimates even as the lender said costs for the year are likely to be at the high end of the range previously provided. *𝗕𝗡𝗬 𝗠𝗘𝗟𝗟𝗢𝗡 - Bank of New York Mellon reported Q2 adjusted earnings Friday of $1.51 per diluted share, up from $1.38 a year earlier. - 2Q CET1 RATIO 11.4%, EST. 11.1% - 2Q NET INTEREST MARGIN 1.15% - 2Q ADJ. REV. $4.60B, EST. $4.52B - 2Q TOTAL DEPOSITS $304.31B, EST. $288.77B - 2Q NET LOANS $70.36B, EST. $70.68B - AUM $2.05T, EST. $2.03T - 2Q NET LOANS $70.36B, EST. $70.68B Link : https://lnkd.in/eEZrFZJf * 𝗪𝗘𝗟𝗟𝗦 𝗙𝗔𝗥𝗚𝗢 - Wells Fargo 2Q Net Interest Income Misses Estimates. - 2Q REV. $20.69B, EST. $20.28B - 2Q NET INTEREST INCOME $11.92B, EST. $12.12B - 2Q TOTAL AVERAGE LOANS $917.0B, EST. $924.39B - 2Q PROVISION FOR CREDIT LOSSES $1.24B, EST. $1.28B - 2Q CORPORATE AND INVESTMENT BANKING REV. $4.84B - 2Q TOTAL AVG. DEPOSITS $1.35T, EST. $1.36T - 2Q NET INTEREST MARGIN 2.75%, EST. 2.77% Link : https://lnkd.in/eYS67Bgf * 𝗝𝗣 𝗠𝗢𝗥𝗚𝗔𝗡 -JPMorgan Chase Q2 2024 Adj EPS $4.40 Beats $4.19 Estimate, Managed Net Revenue $50.992B. - 2Q ADJ. REV. $50.99B - 2Q ROE 23%, EST. 17.4% - 2Q PROVISION FOR CREDIT LOSSES $3.05B, EST. $2.83B - 2Q MANAGED NET INTEREST INCOME $22.86B, EST. $22.82B - 2Q STANDARDIZED CET1 RATIO 15.3%, EST. 15.1% - 2Q CASH & DUE FROM BANKS $27.27B, EST. $22.78B - 2Q TOTAL DEPOSITS $2.40T, EST. $2.43T - 2Q INVESTMENT BANKING REV. $2.46B, EST. $2.13B - 2Q FICC SALES & TRADING REV $4.82B, EST. $4.85B - 2Q LOANS $1.32T, EST. $1.32T Link : https://lnkd.in/epPP2rTT * 𝗖𝗜𝗧𝗜𝗚𝗥𝗢𝗨𝗣 -Citigroup 2Q Banking Revenue Beats Estimates.  Citigroup's profit rose in the second quarter, boosted by a 60% jump in investment banking revenue and gains in its services division. - 2Q BANKING REV. $1.63B, EST. $1.55B - 2Q WEALTH REV. $1.81B, EST. $1.73B - 2Q TOTAL LOANS $687.7B, EST. $680.54B - 2Q INVESTMENT BANKING REV. $853M, EST. $870.4M - 2Q FICC SALES & TRADING REV $3.56B, EST. $3.61B - 2Q MARKETS REV. $5.09B, EST. $4.75B - 2Q EQUITIES SALES & TRADING REV $1.52B, EST. $1.13B - 2Q US PERSONAL BANKING REV. $4.92B, EST. $5.12B Link: https://lnkd.in/eAkkKBZr

JPMorgan Chase's first-quarter earnings rose 6%, the bank said Friday. Profit jumped to $13.42 billion, or $4.44 per share, from $12.62 billion, or $4.11 per share, last year. Analysts had forecast $4.17 per share. Revenue rose to $41.93 billion, up 9% from $38.35 billion last year. Analysts had forecast $41.69 billion. JPMorgan's earnings from lending jumped to $23.08 billion, up 11% from last year. It was a decline versus last quarter and slightly less than the $23.13 billion analysts had expected. The bank projected its full-year net interest income, the difference between what it earns on loans and securities minus what it pays depositors would be flat from last year, reflecting growing pressure on banks' lending businesses from higher interest rates.

The article from The Daily Hodl discusses the challenges faced by major US banks like JPMorgan Chase, Bank of America, Wells Fargo, and Citigroup due to a rise in troubled loans. Here's a summary: - These banks risk losing a combined total of $24.4 billion due to an increase in non-performing loans. - Non-performing loans increased by $6 billion year-over-year in the last quarter of 2023. - The increase in bad loans and higher deposit costs due to rising interest rates likely reduced bank earnings in the final quarter of 2023. - Banks are implementing cost-cutting measures, including layoffs and related expenses. - Despite the challenges, these banks have reduced the capital set aside for future non-performing loans, expecting a trend shift. - Regional banks are also at risk, especially with their exposure to the troubled commercial real estate sector. https://lnkd.in/gT5c-8cd

🔔 Quarterly Bank Earnings Update! This quarter, while JPMorgan Chase, Wells Fargo, and Citigroup outpaced earnings forecasts, challenges in net interest income took center stage, impacting their stock prices. 🏦 JPMorgan Chase saw a significant 6% drop despite strong earnings, due to 𝐥𝐨𝐰𝐞𝐫-𝐭𝐡𝐚𝐧-𝐞𝐱𝐩𝐞𝐜𝐭𝐞𝐝 𝐧𝐞𝐭 𝐢𝐧𝐭𝐞𝐫𝐞𝐬𝐭 𝐢𝐧𝐜𝐨𝐦𝐞. 💰 Wells Fargo experienced a slight decline of 0.5% following a sharper than anticipated 𝐝𝐫𝐨𝐩 𝐢𝐧 𝐧𝐞𝐭 𝐢𝐧𝐭𝐞𝐫𝐞𝐬𝐭 𝐢𝐧𝐜𝐨𝐦𝐞, overshadowing their earnings beat. 🌐 Citigroup surpassed sales and profit estimates and projected strong revenue for 2024. Yet, their stock fell over 2% because of 𝐝𝐫𝐨𝐩 𝐢𝐧 𝐧𝐞𝐭 𝐢𝐧𝐭𝐞𝐫𝐞𝐬𝐭 𝐢𝐧𝐜𝐨𝐦𝐞. 📉 Why is NII Important? Net Interest Income (NII) is the difference between the money a bank earns from loans and what it pays out for deposits. It shows how much a bank is earning from its main activities. For example, if a bank earns $5 million in interest from loans it has given out, but pays $3 million in interest to its depositors, the net interest income (NII) would be $2 million. This $2 million is what the bank essentially earns from its lending and borrowing activities. 🚀 Takeaway: Keeping an eye on NII can provide investors with significant insights into a bank’s financial health and market position.

It’s a wrap for the Q1 2024 earnings print for Canada’s big six banks as TD (pops 2% premarket) and CIBC (pops 0.5% premarket) close out with earnings beat. “Toronto-Dominion Bank beat analysts’ estimates on an increase in revenue driven by strength in both its capital markets unit and growth in loans and deposits in the lender’s domestic retail business. The lender earned $2 a share on an adjusted basis in the fiscal first quarter, it said in a statement Thursday, ahead of the $1.94 average estimate of analysts in a Bloomberg survey. It reported total revenue of $13.7 billion for the three months through January, beating forecasts of $12.2 billion.” Net profit was $2.82 billion, up from $1.58 billion a year earlier Provision for credit losses was $1 billion vs $0.944 billion expected.