Banking on Success: A Deep Dive into U.S. Bank Earnings

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INDUSTRY SNAPSHOT

Earnings Reports Analysis of the Top 5 U.S Banks

We dove deep into the earnings reports of the top 5 U.S. banks, scrutinizing their performance in the latest quarter. Our focus is on areas where these financial giants either exceeded or fell short of expectations, providing a detailed analysis of their performance. Additionally, we highlight specific segments that experienced declines, offering insights into the shifting dynamics within these banking institutions.

JPMorgan (JPM), Bank of America (BAC), & Wells Fargo (WFC) - Highlighting Trends & Changes

1. JPM's Net Revenue Decline: JPMorgan experienced a quarter-over-quarter decrease in net revenues from $39.874 billion to $38.574 billion, signaling a potential cooling in financial activities.

2. BAC's Decreased Non-interest Income: Bank of America reported a significant quarter-over-quarter decrease in non-interest income (25.69%), from $10.788 billion to $8.013 billion.

3. WFC's Stable Interest Income: Wells Fargo showed a consistent increase in interest income over the year, reaching $22.839 billion in Q4 2023.

4. JPM's Growing Asset Management Fees: JPMorgan saw an increase in asset management fees year-over-year, reaching $4.077 billion in Q4 2023.

5. WFC's High Non-interest Expense: Wells Fargo's non-interest expense showed a notable increase, especially in personnel and technology segments.

6. JPM's Significant Increase in Provision for Credit Losses: JPMorgan’s provision for credit losses increased dramatically, almost doubling from the third to the fourth quarter of 2023.

7. WFC's Net Income Drop: Wells Fargo experienced a substantial decrease in net income, dropping by 40.3% from the third to the fourth quarter of 2023.

8. Rising Interest Expenses Across Banks: Many banks, including Wells Fargo and JPM, reported significant increases in interest expenses, indicating rising costs of borrowing or increased lending volumes.

9. JPM's Increase in Mortgage Fees: JPMorgan experienced a remarkable increase of 168.37% year-over-year in mortgage fees and related income.

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INDUSTRY SNAPSHOT - CONT’D

Let’s compare the revenue metrics across the industry for this quarter. Our analysis includes a comprehensive look at revenue growth and a keen examination of which banks are leading with a higher percentage of non-interest income. This segment offers a clear perspective on how each bank stacks up against its peers in terms of revenue generation and growth.

As well as the YoY Revenue growth when we look back to Q4 of 2022. Bank of America was the worst performer of the quarter, which is evident as the share price has dropped over 5% since earlier this month.

Next, we illustrate a comparative breakdown of non-interest income as a percentage of total revenue among top U.S. banks for Q4 2023. Non-interest income is a critical component of a bank's revenue and includes money earned from fees, such as account service charges, and investment banking activities like asset management and trading securities. Non-interest income differs from interest income, as it is derived from various banking services and fees rather than from the interest earned on loans.

Goldman Sachs leads with 88% of its revenue coming from non-interest sources, followed closely by Morgan Stanley at 85%, indicating a substantial reliance on these activities beyond traditional interest-earning products like loans. JPMorgan Chase and Wells Fargo are both at 38%, and Bank of America is slightly lower at 36%, showing a more balanced approach between traditional lending and other financial services. This breakdown reveals the varying business models in the banking sector, where firms like Goldman Sachs and Morgan Stanley are less dependent on interest rates for revenue, positioning themselves distinctively within the industry.

This distinction between non-interest and interest income is particularly relevant for Goldman Sachs and Morgan Stanley, which exhibit higher percentages of non-interest income. This strategy signifies a diversified revenue model, less dependent on traditional lending and more resilient to interest rate changes and lending market fluctuations.

HOW DO THEY MAKE MONEY

Morgan Stanley (MS) - How Do They Make Money?

1. MS's Slight Revenue Increase Year-Over-Year: Morgan Stanley's net revenues increased marginally from $12.749 billion in Q4 2022 to $12.896 billion in Q4 2023.

2. MS's Stable Wealth Management Revenue: Despite broader fluctuations, Morgan Stanley's Wealth Management segment remained relatively stable.

3. MS's Operating Expenses Surge: Morgan Stanley's operating expenses increased by 8.04% from Q3 to Q4 2023.

Goldman Sachs (GS) - How Do They Make Money?

1. GS's Diverse Investment Banking Performance: Goldman Sachs displayed a mixed performance in investment banking, with a significant year-over-year decrease in advisory, but increases in equity and debt underwriting.

2. GS's Substantial Increase in Asset & Wealth Management: Goldman Sachs reported a 36% increase in Asset & Wealth Management revenues quarter-over-quarter.

3. GS's Consumer Platforms Growth: Goldman Sachs' Consumer Platforms segment reported a moderate year-over-year increase of 16%.

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HISTORICAL RETURN

How $10,000 Invested in JPMorgan (JPM) & Goldman Sachs (GS), the Top Performing Banks by Share Price, Would Have Returned Over The Last Two Decades

As of January 2024, a $10,000 investment in JPM would have grown to approximately $43,906, while the same amount invested in GS would have reached about $39,088. This represents an increase of around 339% for JPM and approximately 291% for GS, indicating that both investments would have yielded a robust return, with JPM slightly outperforming GS in terms of percentage growth. The trend lines on the graph also highlight the market's volatility over the years, yet both investments demonstrate a general increase in value over the long term.

WHAT WE’RE WATCHING NEXT WEEK

Monday - After Market Close

• Logitech (LOGI)

• United Airlines (UAL)

Tuesday - After Market Close

• Netflix (NFLX)

Wednesday - After Market Close

• Tesla (TSLA)

Thursday - Before Market Open

• American Airlines (AAL)

• Southwest Airlines (LUV)

• Blackstone (BX)

Thursday - After Market Close

• Intel (INTC)

• Visa (V)

Friday - Before Market Open

• American Express (AXP)

WORD FROM WIZ

That’s all we have for you in today’s edition of ChartWiz. If you found this valuable, please consider forwarding it to a friend.

If there’s anything you’d like to see in this newsletter that we don’t have, please send us a reply or DM us.

See you next week!

-Wiz

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