Goldman Beats Big, JPMorgan Falls Short: What Bank Results Signal for Stocks

Goldman Sachs outperformed earnings estimates by 30% on Tuesday, with stock-trading revenue jumping 72%. JPMorgan Chase, the biggest US bank, came up short on earnings and revenue alike.

Bank earnings give an early read on the economy's health. This latest set arrived with bond yields around a 24-year high, one month after the Federal Reserve's first rate increase since 2023.

Big Banks Earnings Roundup

Goldman posted per-share earnings of $17.01, comfortably ahead of the $13.09 projection. Net revenue came in 23% higher at $18.68 billion, its filing shows.

Its equities desk, the unit that handles stock trades for hedge funds and other big clients, took in $6.44 billion. Fixed-income trading was unchanged.

JPMorgan's figures painted a different picture. After excluding a $658 million securities loss, the bank earned $5.75 a share, below the $5.92 Bloomberg consensus.

Revenue at its fixed-income desk, which handles bonds, currencies and commodities, slipped 4% to $5.4 billion. Reuters reported that shares fell about 3% ahead of the opening bell.

Wells Fargo produced per-share earnings of $1.87, narrowly above expectations. Revenue, however, totaled $21.87 billion, coming in 2.1% under forecasts, according to StockStory data.

Its net interest income — the difference between what it charges on loans and pays out on deposits — also came up short at $12.52 billion.

Citigroup, reporting last of the four, topped forecasts. Per-share earnings were $2.85 versus the $2.65 expected by analysts, per Investing.com data. Revenue increased 8% to $23.8 billion, its strongest third quarter in a decade, its release said.

Stock-trading revenue rose 14%, with prime-brokerage client balances up more than 40%. Bond-trading revenue gained 4%.

What Bank Results Mean for the Stock Market

BeInCrypto's big bank earnings preview argued that a single miss could be dismissed, while a string of misses would drag on the market. Tuesday's outcome was two beats and two misses.

Bank earnings, though, carry limited weight for the broader market this season. FactSet projects bank profits will grow roughly 3%, versus 29.6% for the S&P 500, making the rally dependent on tech and energy instead of lenders.

The bar for banks is low: FactSet sees Q3 EPS growth of just 3.0% for Financials vs 29.6% for the S&P 500, and the sector trades at 14.3x forward.

JPMorgan's Q3 EPS estimate rose to $5.93 from $5.49 since June 30 (FactSet, Oct 9).

(Analysis, not advice.)

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That helps explain why index futures moved little after Goldman and Citigroup beat, while JPMorgan and Wells Fargo missed. The reports did not derail the rally, but they also did not push it beyond technology — the outcome bulls had hoped for.

The more useful signal lies in how the banks generated their money.

• Equities trading boomed.
• Goldman extended a record amount of hedge-fund loans.
• Leveraged stock bets are accumulating.

Bond trading, by contrast, dipped at JPMorgan, which also booked a $658 million securities loss. Wells Fargo's lending income came in short despite solid loan growth — all indications that higher rates are beginning to bite.

JPMorgan CEO Jamie Dimon pointed to the strains accumulating beneath an economy that is still expanding.

“…large fiscal deficits, sticky inflation, elevated asset prices, rising interest rates and geopolitical conditions continue to shift under the surface,” he said.

Given those warnings, Wednesday's inflation reading now carries more weight for stocks than the bank results did.