JP Morgan, Goldman Q2 Earnings Will Offer Fresh Insight On Consumer, Business Sentiment And Spending

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The dog days of summer are here, and with them, earnings season heats up.

This is the second go-round for big banks, as we get the second-quarter updates that point to where consumers’ mindsets have been — in terms of spending, yes, but saving, too — and where that mindset may be headed.

As is germane to our audience at PYMNTS, the Wall Street narrative — trading volumes, derivatives, institutional and investment banking flows — will not be the center of attention. Rather, we’ll be eyeing loan and deposit trends, and especially, card spending. Though debit spending has been on the upswing amid the pandemic, as consumers and families have kept an eye on spending what they have (not simply what they could spend), we’ll examine whether green shoots in credit might be taking root.

“Government relief efforts and forbearance provided by banks appear to have served as an effective bridge for borrowers,” Nathan Stovall, an analyst at S&P Global Market Intelligence, wrote in an investor report, as relayed by The New York Times. “Now, many consumers and businesses are on solid footing as Covid-19 vaccinations allow economies to reopen.”

We’ll likely see the continued release of reserves into earnings, as banks find that loan performance was and is better than had been hoped during the darkest days of the pandemic a year ago.

One trend that has gotten a tailwind through the past year due to the great digital shift has been the inexorable rise of mobile banking.

At a high level, as reported by the Financial Times, the average earnings in the third quarter versus a year ago is slated to jump by bout 116 percent, due in part to those reserve releases. Also at a high level, consolidated revenues will decline by about 5 percent year on year.

Some key things to watch are outlined below.

JPMorgan 

Last quarter the company reported that credit card sales volume (excluding commercial cards), as disclosed in supplementals, was $183.7 billion, up 3 percent from the March quarter. Total credit and debit sales volume was up 9 percent. Active mobile customers were up 9 percent to 41.9 million. We may get commentary on the call from CEO Jamie Dimon, in reference to mergers and acquisitions and what areas of focus might be on the horizon. For the quarter, the Street expects to see $3.17 in earnings and $29.9 billion in sales.

Goldman Sachs 

The Street expects to see $9.95 in earnings; revenues are projected to grow by about 25 percent to $12.2 billion. Though investment banking and traditional Wall Street activities may be in focus, there is likely to be at least some commentary about how consumer initiatives are faring, especially with Marcus, its digital consumer bank.

To recap : In the latest quarter, revenue in Goldman’s consumer and wealth-management division, which includes its Marcus consumer bank, rose 16 percent to $1.7 billion. CEO David Solomon noted on the last earnings call that the March quarter was notable as the company launched Marcus Invest in the U.S., its digital investment product.

“We have a plan at the moment to build a digital bank that’s offering an array of integrated basic services in a completely digital, frictionless platform. And we’re extremely focused on that,” Solomon said during that call.

Citi 

Citigroup is slated to see earnings of about $1.98 in the latest quarter on sales of $17.3 billion. In addition to having released $1.5 billion of reserves last quarter, the company also said it is shuttering most consumer banking operations in 13 markets across Asia, Europe and the Middle East. Instead, as we noted, Citi will focus on wealth management and in the businesses that work with corporate clients in Asia. All told, the company is exiting consumer operations in Australia, Bahrain, China, India, Indonesia, Korea, Malaysia, the Philippines, Poland, Russia, Taiwan, Thailand and Vietnam.

Bank of America 

We may get some additional detail on the expansion of the digital business-to-consumer (B2C) payment offerings with its Pay to Card solution. In addition, as noted in the most recent earnings report, consumers’ increasing use of digital banking was a key driver of the bank’s growth. Active digital banking users hit 40.3 million, up 3 percent in the first quarter. Per commentary on the earnings call, the company added that digital sales were nearly half, 49 percent, of all “consumer banking sales.” This continued growth included an outsized 2.6 billion digital logins in the first quarter of 2021.

Wells Fargo 

In further evidence of the uptake in debit spending, though last quarter Wells reported that credit card-based spending was up 6 percent, debit spend was up 20 percent. And in a nod to digital initiatives, the company said it had about 33 million active digital customers across the online and mobile segments. Analysts expect 96 cents in earnings on revenues of about $17.8 billion, which in turn would be down about 30 basis points year on year.




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