Big Banks Post Mixed Q3 Results

Wall Street opened Tuesday with four of the largest U.S. banks releasing third-quarter earnings, leaving investors parsing corporate health across the major firms.

The bank results were mixed. Goldman Sachs beat analyst estimates on both revenue and earnings per share, driven by strong equities trading, while JPMorgan Chase — the largest U.S. bank by assets and the largest in the world by market capitalization — posted a rare miss. Citigroup and Wells Fargo rounded out the morning's reports, with Bank of America and Morgan Stanley set to follow on Wednesday.

Investment banking fees held up across all four firms on a year-over-year basis but slipped quarter over quarter at every one of them. JPMorgan's investment banking revenue rose 14% from a year ago but fell 8% from the second quarter. Goldman's fees were 21% higher year over year but 5% lower than Q2. Citi posted the steepest sequential drop, down 13%, while Wells Fargo fell 5% from the prior quarter.

IPOs that came in September were really the result of conversations in May and June around valuation expectations. Things got a little bit softer in September. The IPO market was wide open. It's just if you expected a valuation and you got something 10% to 15% less, you might choose not to go forward, you might choose to wait.— David Solomon, CEO, Goldman Sachs

Despite the quarter-over-quarter softness, JPMorgan CFO Jeremy Barnum described the pipeline as 'very, very strong,' and Solomon echoed that view, pointing to AI infrastructure financing as a durable source of capital markets activity going forward — while also sounding a note of caution.

There is going to be a lot of financing to do, and we're going to be in the middle of that. It may be that over time as the financing needs grow, that there's pressure on rates and that will affect the returns and the viability of certain projects. Not every project is going to be received as well.— David Solomon, CEO, Goldman Sachs

There will be a point in time when this recalibration resets, for sure. When that does happen, of course there'll be some bumps.— David Solomon, CEO, Goldman Sachs

Artificial intelligence came up on every analyst call — framed as both a revenue opportunity and an operational risk. Citigroup CEO Jane Fraser described the bank's approach to AI-related cyber threats as proactive rather than reactive.

Our cyberdefense strategy is about being on the front foot, about moving fast and retaining trust. We don't wait for risks to happen. We're constantly preparing and improving our defenses. We're in the business of managing risk everyday, and this is no different.— Jane Fraser, CEO, Citigroup

Fraser also offered a broadly upbeat read on the economy, noting that the global economy had 'held up remarkably well' and that U.S. consumers continue to drive growth even amid an AI-dominated news cycle. Wells Fargo CFO Mike Santomassimo struck a similar tone, telling CNBC that both consumers and businesses are doing 'really well' and that the bank is not seeing delinquency trends that would signal near-term stress.

I think despite higher gas prices, both sides of the equation have been able to really work through that. We're just not seeing any sort of cracks around delinquency trends that would lead you to believe you're going to see any near-term stress that come through, at least at least for now.— Mike Santomassimo, CFO, Wells Fargo

On a separate front, Goldman Sachs CEO Solomon directly addressed reports — citing anonymous sources — that he would be replaced as CEO by Goldman President John Waldron as early as next year. Solomon denied any such process is underway.

No succession process or timeline is underway at the investment bank.— David Solomon, CEO, Goldman Sachs

Bank of America and Morgan Stanley are due to report Wednesday, completing the major U.S. bank earnings cycle for the third quarter.

Why it matters — The simultaneous release of a key inflation report and major bank earnings gives investors their clearest single-day read yet on whether the U.S. economy — and the financial sector — can sustain growth under elevated borrowing costs.

Sources differ on Goldman Sachs CEO succession: Reports citing anonymous sources said Solomon would be replaced by President John Waldron as early as next year. (cnbc.com (citing prior reports)) vs Solomon stated Tuesday that no succession process or timeline is underway. (cnbc.com)

Reported by bls.gov, cnbc.com