Bank of America ( BAC ) reported better-than-expected third-quarter earnings Friday, amid strong loan demand, while Wells Fargo ( WFC ) fell short on revenue as lending slowed.
The results come a day after earnings reports from JPMorgan Chase ( JPM ) and Citigroup ( C ), whose shares, some analysts said, were weighed down by worries over credit as the current credit cycle advances into the later stages.
Morgan Stanley ( MS ) and Goldman Sachs (GS) will close out the big banks' earnings season next week.
Bank of America's earnings per share rose 17% to $0.48, beating Zacks estimates for 46 cents. Revenue was up 1% to $22.08 billion, just beating forecasts for $21.981 billion.
As with other banks, BofA's trading overall remained weak compared to a year ago, when geopolitical shocks churned markets. Banks face particularly tough comparisons to 2016, when surprises like Brexit and President Trump's election spurred brisk trading activity.
Revenue for fixed income, currencies and commodities fell 22%, but rose 2% for equities.
Consumer banking revenue rose 10% to $8.8 billion, global banking revenue climbed 5% to $5 billion, and global wealth and investment management revenue gained 6% to $4.6 billion. Loans grew by 8%, 4% and 8%, respectively, across those three businesses. Net charge-offs rose 1%.
Overall, BofA's loan-loss reserves fell by 2%. In its consumer banking division, the bank set aside an extra $269 million for credit losses, citing "credit card seasoning and loan growth." The bank said credit quality remained strong.
JPMorgan and Citigroup on Thursday also said they padded their reserves during the third quarter to cover credit-card losses.
Nomura-Instinet analyst Steven Chubak said Bank of America's shares "underperformed yesterday ... as the market saw elevated credit costs for Citi and JPM as an omen for BAC earnings."
"However, on balance, BAC's results stack up better than those of peers," Chubak said, citing better-than-expected credit, net interest income, loan growth and expense management.
Bank of America shares rose 1.5% to 25.83 in the stock market today , back above a 25.45 entry after sinking to 25.12 in the morning. BofA fell to 25.45 on Thursday.
Wells Fargo, meanwhile, reported EPS up 1% to $1.04, which excludes a litigation accrual of 20 cents a share related to a pre-financial-crisis mortgage-related investigation. The figure was in line with expectations. But revenue fell 2% to $21.9 billion, missing estimates for $22.32 billion.
Net interest income grew 4% to $12.5 billion. Net interest margin, a measure of the difference between the interest taken in from loans and paid to depositors, was 2.87%.
"We are waiting for the quarter that Wells shows stronger momentum across the business and this was not the quarter," Keefe, Bruyette & Woods analyst Brian Kleinhanzl wrote in a research note on Friday, adding that loan growth and the bank's net interest margin were lower than they expected.
Total loan balance was $951.9 billion, down $5.5 billion from Q2 and $9.45 billion from a year ago. Q3 marked the third straight sequential decline in loan balance. The net loan charge-off rate rose to 0.3% from 0.27% in Q2. Total deposits climbed by $5.2 billion during Q3 to $1.3 trillion.
Shares fell 2.75% to 53.69. The stock also retreated Thursday, moving further from a double-bottom base buy point of 56.70.
Wells Fargo continues to deal with scrutiny over its sales practices amid allegations of fabricating accounts, altering home loans and giving customers auto insurance they didn't want. Analysts, as they have for the past year, will be looking for signals that the bank can make things right with consumers and investors.
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Across most of the big money center banks, trading has been a sore spot for the second and third quarters as well, and could be for the rest of the year.
JPMorgan Chase ( JPM ), which reported third-quarter earnings on Thursday, forecast weak fourth-quarter trading results, saying there was nothing obvious on the horizon that would give them a boost.
Still, JPMorgan's third-quarter EPS topped estimates. Lending was solid. Higher interest rates, a result of rate hikes from the Federal Reserve, also helped. Citigroup's ( C ) results were also better than analysts expected.
But analysts raised concerns about the increases in provisions that the banks set aside to cover bad loans.
Citigroup in Q3 set aside an extra $500 million related to its North American card business, based on its expectations for bad loans and the effects of recent hurricanes. JPMorgan said net card charge-offs were higher during the third quarter and that it had added $300 million in credit-card reserves, largely due to the "seasoning of newer vintages."
Analysts have said that investments in Citigroup's Costco (COST) card, and other cards, could start adding to earnings in the second half of this year. But Citigroup's branded-card revenues in North America fell 1% in the third quarter, adding to investors' disappointment.
CFO John Gerspach said that the Costco card "remains a real winner" and that they were seeing growth in account balances and purchases.
Moody's warned in June that over the last several quarters, credit-card charge-offs, or debt a lender believes it has next to no chance of getting back, had "increased materially for some US lenders," amounting to the biggest spike since 2009.
JPMorgan, the firm said then, had put up a "more stable performance," while Bank of America was strong and Citigroup appeared to "be weakening only slightly."
"We continue to believe that credit will continue to normalize at a relatively slow pace, and we are not overly concerned with the pickup in delinquency rates this quarter," Kleinhanzl wrote in a research note on Thursday.
JPMorgan dipped 0.1% to 95.88 but rebounded from an intraday low of 94.96, briefly dropping below a 95.32 buy point. Citigroup slipped 0.4%, but off session lows.
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