Goldman Crushes Estimates, Jpmorgan Misses: What Do Bank Earnings Mean For Stocks?

What Happened

Citigroup, the last of the four to report, beat forecasts. It earned $2.85 per share, above the $2.65 analysts expected, Investing.com data show. Revenue rose 8% to $23.8 billion, its best third quarter in a decade, according to its release.

Market Context

Goldman Sachs beat profit forecasts by 30% on Tuesday as its stock-trading revenue jumped 72%. JPMorgan Chase, the largest US bank, missed on both profit and revenue.

Big Banks Earning Recap

Its equities desk, which trades stocks for hedge funds and other large clients, brought in $6.44 billion. Bond trading was flat.

Its stock-trading revenue rose 14% on prime brokerage, where client balances grew more than 40%. Bond trading revenue rose 4%.

What Do Bank Earnings Mean for the Stock Market?

BeInCrypto’s big bank earnings preview noted that one miss could be shrugged off, while a pattern of misses would weigh on the market. Tuesday brought two beats and two misses.

However, bank earnings do not do much for the stock market as a whole this season. FactSet expects banks’ profits to grow about 3%, against 29.6% for the S&P 500, so the rally rests on tech and energy, not lenders.

Stock trading boomed

Meanwhile, bond trading slipped at JPMorgan, JPMorgan booked a $658 million securities loss, and Wells Fargo’s lending income missed despite strong loan growth, all signs that higher rates are starting to bite.

“…large fiscal deficits, sticky inflation, elevated asset prices, rising interest rates and geopolitical conditions continue to shift under the surface,” he said.

Why It Matters

Goldman earned $17.01 per share, well above the $13.09 analysts expected. Net revenue rose 23% to $18.68 billion, according to its filing.

Wells Fargo earned $1.87 per share, edging past estimates. However, revenue of $21.87 billion missed forecasts by 2.1%, StockStory data show.

The more useful signal is in how the banks made their money.

Details

Bank results act as an early health check on the economy. This batch landed with bond yields near a 24-year high, a month after the Federal Reserve raised rates for the first time since 2023.

JPMorgan’s results, meanwhile, told a different story. Excluding a $658 million securities loss, it earned $5.75 per share, short of the $5.92 Bloomberg consensus.

Its fixed-income desk, which trades bonds, currencies, and commodities, saw revenue fall 4% to $5.4 billion. Shares slid about 3% before the opening bell, Reuters reported.

Its net interest income, the gap between what it earns on loans and pays on deposits, also fell short at $12.52 billion.

That explains why index futures barely moved after the Goldman and Citigroup beats and the JPMorgan and Wells Fargo misses. The results did not break the rally, but they didn’t spread it beyond tech either, which is what bulls were hoping for.

Goldman lent a record amount to hedge funds, and

Borrowed bets on stocks are piling up.

JPMorgan CEO Jamie Dimon flagged the pressures building under a still-growing economy.

Based on these warnings, Wednesday’s inflation report now matters more for stocks than these bank results did.

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