Monday, September 15, 2014

How Six “Big Banks” Fared in 2014's Second Quarter

Investors who do business with the nation’s “big banks” recently gained access to the earning reports of each company for the second quarter of 2014. Here’s a look at which institutions met or exceeded industry expectations and which fell short in relation to others.

The Goldman Sachs Group experienced a profitable second quarter, thanks in part to a rise in investment banking fees. The company reported a 6 percent increase in revenue for a total of $9.13 billion. Goldman Sachs’ net income of $1.86 billion was the result of a 5 percent gain from the second quarter of the prior year. Diluted earnings per share reached $4.10, a $0.40 increase from the same prior-year period and an $0.08 increase from the first quarter of 2014.

Morgan Stanley also reported strong second-quarter earnings in comparison to this time last year, netting $1.86 billion in profit, a 131 percent gain. Revenue increased 1 percent to reach $8.6 billion, and adjusted earnings per share settled at $0.60, a 46 percent increase from the second quarter of 2013. As is the case with some other big banks, Morgan Stanley’s investment management segment saw an impressive gain in revenue, from $673 million to $692 million. The wealth management segment reported a slight improvement in earnings from $3.5 billion to $3.7 billion.

Despite a 1.5 percent decrease in revenue, Wells Fargo performed well overall with total revenue earnings of $21.1 billion in this year’s second quarter. Gains were reported in the areas of net income, which increased from $5.5 billion to $5.7 billion, and earnings per share, which increased by $0.03 to land at $1.01. Wells Fargo delivered a strong performance in regard to trust and investment fees, generating $3.61 billion.

Amid legal ramifications from the issuing of subprime mortgages, Citigroup reported steep declines in net profit (from $4.18 billion to $181 million) and revenue ($19.34 billion, a 5.6 percent loss) between last year’s and this year’s second quarter. Earnings per share were adjusted to $1.24. On the upside, Citigroup’s investment banking revenue improved by 16 percent, bolstered by gains in equity and debt underwriting. Trading revenue, however, declined by 15 percent. Even though in July Citigroup closed higher due to a flurry of mergers and acquisitions activity, the sector is no longer “no longer BMOCs“ according to this article on Chicago Business. “BMOC” stands for ‘Big Man On Campus’ BTW.

Also affected by legal settlements, Bank of America earned $22 billion in revenue, a 4 percent decrease from earnings reported in the previous year. Net income fell from $4 billion to $2.3 billion, and the consumer real estate segment took a $725 million loss. Factoring out legal costs, Bank of America’s earnings per share were reported at $0.41 in the second quarter of 2014. Trading fared better than expected with a 5 percent increase.

While JPMorgan Chase’s earnings report indicated strength in the areas of lending and deals and acquisitions, this big bank demonstrated an 8 percent loss in net profit, a 5 percent loss in revenue and a $0.14 loss in earnings per share. The firm reported a net income of $5.99 billion, a revenue of $24.45 billion and earnings per share of $1.46. Like Citigroup and Bank of America, JPMorgan Chase was affected by legal penalties.