Bank On It

Big banks are always the first group to report each earnings season, but their results have been under even greater scrutiny this time around. It's the first time investors are hearing from many of their management teams since March's turmoil in the sector.

JPMorgan Chase delivered a particularly strong report on Friday that calmed many investors' fears about the negative impact to large U.S. banks. Smaller institutions, reporting a bit later this earnings season, may tell a different story.

Here's Carleton English summing it up:

Wall Street was jittery ahead of earnings in light of the collapses of Silicon Valley Bank and Signature Bank. But the reads from the large lenders suggested that the biggest banks, at least, are well equipped to deal with near-term headwinds.

“There is no evidence of a banking crisis except that it seems that JPM has been a port in the storm,” wrote Wells Fargo Securities analyst Mike Mayo. UBS analyst Erika Najarian echoed that sentiment, writing, “What crisis? The banking industry flexes back.”

The big banks also seem to be benefitting from the turmoil. JPMorgan and others witnessed deposit inflows in the final few weeks of the quarter after the downfall of Silicon Valley Bank and Signature Bank. Those banks’ failures may have prompted customers to move money to bigger lenders, which are seen as stronger and more strictly regulated.

Bank of America was the biggest banking winner today, reporting a 15% rise in earnings from a year ago on a 13% increase in revenue—both handily topping consensus estimates. The stock finished up 0.6%.

The revenue jump was propelled by a 25% increase in net interest income, or the difference between the overall rate it earns on assets and pays on liabilities. Banks have been quick to adjust the rates they're charging on loans as the Federal Reserve has hiked, while dragging their feet on increasing what they pay customers on their deposits.

Read more from Carleton on BofA's earnings report here.

Results from The Bank of New York Mellon—a big player in custodian banking and wealth management—also showed the boost of higher interest rates. The bank's net interest income was up a whopping 62% from the same quarter a year ago.

Earnings per share, up 30%, beat by a penny, while revenue jumped 11%. BNY Mellon's assets under custody were up 2% from a year ago, to $4.7 trillion, while assets under management dropped 16%, to $1.9 trillion.

Overall, there were no big surprises in BNY Mellon's results and shares ended the day up 1.5%. Read more from Karishma Vanjani here.

Goldman Sachs, which is more heavily reliant on investment banking and trading businesses, and less on consumer banking or asset management, told a different story. Cost cuts helped profit margins and led to an earnings beat, but revenue missed. Expenses can't be trimmed forever and investors didn't give Goldman much credit for the results.

Investment banking fees were down 34% from a year ago with fewer initial public offerings and mergers to advise on. Trading revenues missed forecasts while net interest income was actually down from a year ago. Overall revenues were down 5% while earnings slid 18%.

Goldman shares fell 1.7%. Read more from Jack Denton here.

Morgan Stanley reports next tomorrow. Read a preview of what to expect here and the rest of Carleton's banking thoughts here.