Big Banks Smash Earnings Expectations But Rally Fails To Produce New Fuel
The second-quarter earnings season for banks kicked off with blowout numbers from the biggest names on Wall Street, but investors weren't in the mood to celebrate.
Despite a string of upside surprises in profit and trading performance, investors focused sharply on guidance and margin pressure, sending several top bank stocks lower.
The Financial Select Sector SPDR Fund (NYSE:XLF), which tracks major U.S. banks, slid 1.1% by 10:15 a.m. in New York.
JPMorgan: Strong Results, But Higher Costs Hit Sentiment
JPMorgan Chase & Co. (NYSE:JPM) kicked off earnings season with second-quarter earnings per share of $5.24, blowing past the $4.47 consensus estimate by 17%.
Revenues also came in strong at $45.68 billion, versus the expected $44.05 billion.
The standout driver: investment banking and trading, where equities and FICC (fixed income, currencies and commodities) revenues beat forecasts by $50 million and $470 million, respectively.
Despite a modest miss on net interest income (NII)—$23.31 billion vs. $23.59 billion expected—the bank lifted its full-year NII forecast to $95.5 billion from $94.5 billion.
Return on equity jumped to 18%, well above the 15.1% estimate, and loan growth surged past expectations with $1.41 trillion in total loans.
"JPM delivered on strong fees and raised guidance, even as core NII came in light," Goldman Sachs analyst Richard Ramsden said in a client note, adding that the bank's 20.6% return on tangible equity was 360 basis points above its long-term guidance.
Yet, shares slipped 1.1% as investors zeroed in on higher expense projections and softening net interest margins.
Citigroup: Clean Beat Drives Record High
Citigroup Inc. (NYSE:C) posted one of its strongest quarters in years, with EPS of $1.96 versus the $1.60 consensus. Revenue rose to $21.67 billion, topping estimates thanks to a robust trading environment. FICC revenue hit $4.27 billion, nearly 9% above expectations, while equities trading delivered $1.61 billion.
Trading was a bright spot: FICC sales and trading revenue came in at $4.27 billion, beating expectations by nearly 9%, while equities revenue rose to $1.61 billion. Net interest income also surprised on the upside at $15.18 billion, compared to the $14.05 billion forecast.
Citi now expects full-year adjusted revenue to be near $84 billion, reaffirming the upper end of its previous guidance. The strong report supports recent bullish analyst calls highlighting Citigroup as a top money center bank pick for the remainder of the year.
The market responded positively, with Citigroup shares rising 1% to set a new record high.
Read also: Citigroup Q2 Revenue And Profit Jumps, CFO Says Recession Risk Has Fallen
Wells Fargo: Guidance Cut Overshadows Earnings Beat
Wells Fargo & Co. (NYSE:WFC) also beat expectations with second-quarter EPS of $1.60 versus the $1.41 estimate. Revenues landed at $20.82 billion, essentially in line.
Yet, management trimmed its 2025 net interest income guidance to $47.7 billion, now expected to be flat year over year, citing lower market-related income. That modest disappointment was softened by solid fee income growth and stronger-than-expected loan performance.
"Wells delivered a mixed bag," Ramsden said, noting that while core EPS was slightly below Goldman estimates, loan growth and capital markets fees were encouraging.
Wells Fargo stock declined 4.7% on the news, making it the worst-performing large-cap bank on Tuesday.
Read also: Wells Fargo’s Net Interest Income Shrinks In Q2, Bank Trims Outlook
BlackRock: Record AUM Fails To Impress Investors
BlackRock Inc. (NYSE:BLK) posted adjusted EPS of $12.05, easily beating the $10.87 estimate. While net inflows came in light at $67.74 billion—well below the $84.72 billion forecast—the firm's assets under management rose to $12.53 trillion, driven by strong equity flows and favorable market performance.
Base fee revenue hit $4.45 billion, marginally above estimates, and the asset manager enters the second half of 2025 with a stronger fee base thanks to the closing of its HPS acquisition.
Despite the record AUM, BlackRock shares plunged 6.5%, as softer flows and rising expenses overshadowed the earnings beat.
Read also: BlackRock’s Q2 Net Inflows, Performance Fees Take A Hit
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