Big banks surprise markets by beating revenue expectations

America’s largest banks beat revenue projections due to interest rate hikes amid declines in profit and investment banking.
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Dianna “Mick” McDougall, Photo: tbd/Getty Images

· 4 min read

The biggest banks in the US—JP Morgan Chase, Bank of America, and Citigroup—have now all reported earnings. While they all beat Q3 revenue projections, we’re using our earnings bingo card to determine whether they had anything unique to say, or if they stuck to the tried-and-true talking points we’ve come to expect.

JP Morgan wowed the markets with a 10% revenue jump during the quarter, primarily due to the interest-rate hikes from the Federal Reserve, which helped boost its bottom line. But JP Morgan’s profits were down, much like its competitors’. The company hit five of the bingo terms on our card and were just two squares away from a true bingo.

“Recession” was uttered six times by JP Morgan’s people on its earnings call, notably only once by Jeremy Barnum, group CFO. (For the record: Analysts on the call said “recession” twice, but we’re not giving extra credit for that). The company’s CEO, Jamie Dimon, on the other hand, said on the call that JP Morgan “would have pretty damn good returns in a recession,” despite painting a gloomier picture for the press mere days before the call (which a BoA Merrill Lynch analyst noted during the question portion of the most recent call). When asked if the company was beginning to see cracks, Dimon gave a confident, short answer: “No.” With that track record, adding a free spot and a few more recessions on our card, JP Morgan would have taken the CFO Brew prize.

  • Final bingo score: Fed, recession, consumer spend, inflation, economic outlook

Citi tied JP Morgan on bingo-card slots, ticking off five terms, but short of a bingo. The bank rattled off “supply chain,” “Fed,” “inflation,” “recession,” and “sales” in their earnings. The New-York based bank topped revenue expectations by 6%, but lagged behind others in valuation and profit metrics, impacted by its operations overhaul and overseas exposure.

Maybe our bingo terms were a little on the grim side; Citi CEO Jane Fraser offered optimistic words for the US economy, calling it “resilient” and saying supply-chain constraints were easing, and the labor market remains strong. She added a caveat, however: due to inflation, the bank expects a “mild recession in the second half of ‘23.” While that might not earn the bank more bingo points, it offered a moment of optimism.

  • Final bingo score: supply chain, Fed, inflation, recession, sales

Even more jolly was the economic outlook from Bank of America that led to a stock surge on Monday morning, featuring an earnings transcript with minimal—but still present—mentions of the Fed and recession. Nevertheless, the bank hit on sales and got partial points for adjacent bingo terms on economic outlook, consumer spend, and currency exposure.

  • Final bingo score: recession, Fed
    • Partial credit: economic outlook, consumer spend, currency exposure
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If our bingo card is any indicator, topics such as a return to office, layoffs, and commodity costs are out of sight, out of mind for many bank executives. Despite searching for adjacent terms, human capital and commodity fears are nowhere to be found in the bank transcripts.

The steep jump in share prices could just be that the banks were overly celebrated, considering they beat projections (as Bloomberg’s chief equities strategist told CFO Brew last month), not that the economic picture had suddenly changed. And, not to put too much weight on our bingo card, but all three banks were tied with the same scores, so we were definitely onto something. The feeling is similar to how one might feel after Monday’s market surge: curious, but not quite convinced the path is all clear.

And while the doomsday market psychology that overcame Wall Street in September appears to have stayed at bay for another quarter, Citi told analysts “all eyes are on this winter’s weather forecast,” as energy markets remain in flux and inflation concerns likely motivate the Fed to stay on pace and keep rates up. Our eyes will be set on creating the Q4 bingo card. It’s open for submissions and suggestions until mid-December if you email [email protected] (but then we go into our quiet period. You understand).—KT

News built for finance pros

CFO Brew helps finance pros navigate their roles with insights into risk management, compliance, and strategy through our newsletter, virtual events, and digital guides.