Friday, October 14, 2016

Bank Earnings Blowout (Reprise)

JP Morgan, Citi and the tarnished Wells Fargo all reported third quarter earnings this morning. The press was ecstatic. CNBC's original headline "J P Morgan Crushes Expectations", was quickly revised to read "JP Morgan Profit and Revenue Easily Tops Forecasts". At Business Insider, the headline was even more bold: "JP Morgan Smashed it out of the Park". The headline for Citigroup's release at CNBC was "Citigroup Tops Wall Street Expectations for Earnings and Revenue".  

But none of these titles accurately captures what is going on with bank top line revenue or profits. Reading past the headline, here's what we actually learn. JP Morgan saw its earnings decline by 7.5% year over year and its top line revenue climb back to just above where it was in the third quarter of 2014, two years earlier. And this is the report from the nation's top performing bank. The news at Citibank was no better, with top line revenue falling 4.8 % year over year and profits falling by 5.3%. 

These results confirm a trend of now greater than four years of declining bank revenue and earnings, as previously reported here for 2016 Q2. The major US banks are effectively shrinking, based upon poor top line revenue growth and profitability.