US banking giants JPMorgan Chase and Citigroup posted strong profits on Tuesday, while Wells Fargo suffered another earnings stumble and signaled cost-cutting is ahead.
Shares of JPMorgan and Citigroup rallied after both banks highlighted growth in their credit card businesses as US consumers kept spending during the holiday period.
The two New York giants also cited better institutional client sentiment that boosted some key trading divisions that have been weak in recent quarters.
“What the fourth quarter has demonstrated is the more clarity we have on these geopolitical issues, the more of a benefit we see in terms of corporate sentiment and the prospects for good growth,” Citigroup Chief Financial Officer Mark Mason said on a conference call with reporters.
Besides better relations between the United States and China, Mason cited diminished uncertainty on Brexit and progress on a new US-Mexico-Canada Agreement on trade.
Citigroup scored a 15 percent jump in fourth-quarter profits to $5.0 billion, while revenues rose 7.3 percent to $18.4 billion.
At JPMorgan, net income surged 20.6 percent to $8.5 billion for the three months ending December 31, a period that saw revenues rise 9.0 percent to $29.2 billion.
The results helped the bank score record profits and sales for the year.
Chief Executive Jamie Dimon said despite the “continued high level of complex geopolitical issues” facing the global economy, the “resolution of some trade issues helped support client and market activity towards the end of the year.” Dimon described the holiday season as “robust,” as reflected in a 10 percent jump in credit card sales volumes.
Dimon highlighted China as a key growth market, noting that last year it became the first US bank to be approved for a majority-owned securities business in the country.
Following that approval, JPMorgan plans to hire staff in China, especially in corporate and investment banking, and to a lesser degree in asset management and commercial banking, Dimon said.
“China will grow. We’ll grow with them. We’re going to do it our own way,” Dimon said on a conference call with reporters.
“Maybe the trade issues make it a little bit better or a little bit worse but we’re going to continue to have the exact same plans.” - Turnaround mode - It was a much different story at Wells Fargo, where newly-installed Chief Executive Charlie Scharf has been mapping out a turnaround strategy since joining the struggling bank in October.
The company, a giant in US mortgage lending, has been on the back foot since late 2016 following a fake accounts scandal, one of the regulatory problems that prompted the Federal Reserve to impose a lending cap on the bank.