JPMorgan Chase, Citigroup profits rise as Wells Fargo’s earnings fall

JPMorgan Chase’s second-quarter profits rose by 18% from a year ago, as the nation’s largest bank continues to benefit from higher interest rates and a lower tax bill following last year’s passage of President Donald Trump’s tax law.

JPMorgan earned $8.32 billion in the first quarter, or $2.29 a share, up from $7.03 billion, or $1.82 a share, in the same period a year earlier. The results by the New York-based bank beat analysts’ expectations for earnings of $2.22 a share.

Like in the first quarter, JPMorgan benefited greatly from a much lower tax bill compared to a year earlier. While pre-tax profits rose by $823 million, JPMorgan saw its tax bill drop by roughly 17% in the quarter compared to a year earlier. The bank’s effective tax rate was 21%, compared with 28% in the prior quarter.

Read: U.S. banks strong enough to survive a shock: Fed

JPMorgan also continued to benefit from the growth of the U.S. economy and good health of the U.S. consumer. The bank grew loans and assets, and with higher interest rates, was able to charge borrowers more money. The average net yield on interest-earnings assets—basically the profit margin of a bank which compares how much it costs the bank to lend the money and how much the bank earns on it—climbed to 2.46% in the quarter compared with 2.31% a year earlier. This is despite the bank paying depositors more to keep their assets at the bank.

JPMorgan’s investment banking business posted an 18% increase in profits compared with a year earlier, helped by higher trading revenue in both stocks and fixed-income assets.

Total revenue was $28.39 billion, up from $26.67 billion a year earlier.

Citigroup reports earnings jump

Citigroup’s second-quarter profits jumped 16% from a year earlier, the bank said Friday, helped by a much lower tax bill and higher revenue earned on loans and interest.

Citigroup said it earned $4.49 billion, up from $3.87 billion a year ago. On a per-share basis, Citi earned $1.63 a share, compared with $1.28 a share a year earlier. Analysts had expected Citi to earn $1.56 a share.

Like JPMorgan Chase, which reported its results on Friday as well, Citi grew its loans and assets in the quarter. The bank benefited from higher interest rates, which allowed it to charge borrowers more for loans. But revenue growth was tepid, rising only 2% from a year earlier to $18.47 billion

So most of Citi’s profit growth this quarter came because its tax bill dropped, as it did in the first quarter. The amount of money Citi paid in taxes last quarter dropped 20% from a year earlier to $1.44 billion from $1.76 billion a year earlier.

Citi shares fell 1.4% in early trading to $67.60. They are down roughly 8% this year.

Wells Fargo falls short

Wells Fargo & Co. says second-quarter earnings fell to $5.19 billion from $5.86 billion a year ago.

The bank, based in San Francisco, said it had earnings of 98 cents per share. Adjusted for pre-tax expenses, earnings came to $1.08 per share.

The results fell short of Wall Street expectations. The average estimate of 10 analysts surveyed by Zacks Investment Research was for earnings of $1.12 per share.

The bank also revised its first-quarter earnings downward after agreeing in April to pay $1 billion in fines to federal regulators. The bank has faced multiple investigations in recent years over practices including the opening of accounts without customers’ consent, charging clients for unnecessary insurance policies, and imposing unfair fees tied to mortgage rates.

Although Wells reported a 1% increase in net interest income, thanks to higher interest rates, the company saw declines in customer deposits and in loans, a sign of the lingering impact of the various scandals.

The results include a tax expense of $481 million, mostly related to state income taxes following the recent U.S. Supreme Court decision that allows states to force more people to pay sales tax when they make online purchases.

The biggest U.S. mortgage lender posted revenue of $25.03 billion in the period. Its revenue net of interest income was $21.55 billion, exceeding Street forecasts. Four analysts surveyed by Zacks expected $21.52 billion.

Wells Fargo shares have dropped almost 8% since the beginning of the year, while the Standard & Poor’s 500 index has increased almost 5%. The stock has climbed almost 2% in the last 12 months.

Wells Fargo shares fell 3.2% in premarket trading.

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