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Finance/banking

JPMorgan Q1 2024 Earnings: Steady Earnings With Higher Loss Provisions

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Earnings Season Q1-2024 Big Banks

JP Morgan (JPM)

JPMorgan Chase non-GAAP EPS of $4.63 beats by $0.50, revenue of $41.93B (Up 9.5% YoY) beats by $240M

Q1 -24 Net Interest Income, NII declined 4% sequentially as expected, due to deposit margin compression.

Full Year Net Interest Income, NII guidance is unchanged at $90Bn

Adjusted expenses guidance is $1Bn higher at $91Bn V $90Bn for the year.

The bank card services net charge-off rate is projected to be less than 3.50% vs. its previous guidance of 3.50% – this is a relief, but JPM has a tendency to over provide, so not much of a surprise. Similarly, overall Provision for credit losses was lower at $1.88B, vs. consensus of $2.74B and compared with $2.76B in Q4 and $2.28B in Q1 2023. 

The stock is down 2% premarket, the higher adjusted expense guidance seems to be the main culprit.

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Finance/banking

Citi Q1 2024 Beats Earnings Estimates

Earnings Season Q1-2024 Big Banks

*Citigroup (NYSE:C): $61.50*

Beats on both earnings and revenues —Q1 GAAP EPS of $1.58 beats by $0.41.

Revenue of $21.1B (-1.6% Y/Y) beats by $700M.

Citi had higher credit card losses but is providing a lower allowance for Q2. – cost of credit was approximately $2.4 billion in the first quarter 2024, compared to $2.0 billion in the prior-year period, primarily driven by higher card net credit losses, partially offset by a lower allowance for credit losses build.

The stock is up 1.5% pre-market.

Wells Fargo Q1 2024 Earnings: A Mixed Bag Amidst Stable Credit Quality

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Earnings Season Q1-2024 Big Banks

There were no major surprises from the three big banks, JOM, Citi, and Wells Fargo. Credit loss provisions were in line, slightly lower, so that’s a positive, but nothing consequential on earnings/revenue.

Wells Fargo (WFC) $56.50

Wells Fargo Q1 earnings topped Wall Street’s consensus and credit quality remained healthy. Its provision for credit losses came in significantly below the analyst estimate.

Guidance for Q2 remained the same – it still expects net interest income to decline 7%-9% from 2023’s $52.4B. Its 2024 guidance for noninterest expense at ~$52.6B also remained unchanged.

Q1 EPS of $1.20 vs. $0.86 in Q4 2023 and $1.23 in Q1 2023. Excluding $284M, or $0.06 per share, of additional expense for its FDIC special assessment, Q1 2024 earnings would have been $1.26 per share, topping the $1.09 average analyst estimate.

Total revenue of $20.9B, beating the $20.2B consensus, increased from $20.5B in the previous quarter and $20.7B a year ago.

Provision for credit losses was $938M, vs. the $1.34B consensus, falling from $1.28B in Q4 and $1.21B in Q1 2023.

Net interest income of $12.2B, lagging the $12.3B Visible Alpha estimate, dropped from $12.8B in the prior quarter and $13.3B a year ago.

Net loan charge-off, as a percentage of average total loans, was 0.50% vs. 0.53% in Q4 and 0.26% in Q1 2023.

Lower credit losses and provisioning are positive, there’s nothing to write home about on revenue and EPS, which remain tepid.

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Market Outlook

Great Expectations: Tech Giants’ Solid Earnings Can’t Satisfy High Hopes

Great Expectations. Hi everyone. Sometimes, stocks get ahead of themselves.

Late Tuesday, three of the biggest names in technology—Alphabet, Microsoft, and Advanced Micro Devices—reported December quarter results and offered the latest updates on their AI progress.

While the headline numbers were generally solid, they weren’t good enough to impress investors given the stocks’ big runs.

Microsoft had the best quarter of the bunch, reporting earnings per share of $2.93, well ahead of the analyst consensus of $2.76. Alphabet beat profit estimates, posting EPS of $1.64 versus the consensus of $1.59. AMD’s profit was in line with the estimates, but the company’s revenue outlook was disappointing.

All three stocks were down in mid-day trading Wednesday. Alphabet shares dropped 6%, AMD slipped 3%, and Microsoft was down 1.4%. The tech-heavy Nasdaq Composite was off 1.6%.

The main problem with the reports wasn’t the numbers but the expectations going in. Take AMD’s AI chip outlook. On last night’s conference call with investors, CEO Lisa Su said that AMD now expects revenue for its AI data center MI300 GPU products to surpass $3.5 billion in 2024—up from a $2 billion forecast just three months ago. While the guidance is up significantly, some Wall Street analysts had estimates of up to $8 billion.

Investors would be wise to largely overlook these day-to-day stock movements. The technology companies’ conviction over future AI demand is more important. And, given the latest commentary about capital expenditure budgets, the robust trend is intact.

Microsoft said its expects capex to “increase materially” in the current quarter, and it intends to invest aggressively in the coming quarters. Alphabet said its capex would be “notably larger” in 2024 versus the prior year. Both companies said infrastructure investments are being driven by trends in AI demand.

There’s other evidence the AI arms race is still on beyond the comments from Microsoft and Alphabet. On Monday, Super Micro—a leading independent manufacturer of high-end AI servers for data centers— easily beat expectations and raised its full-year revenue guidance by nearly 40%. Last week, Nvidia CEO Jensen Huang told reporters in Taiwan that demand for AI GPUs is still outstripping supply, while adding 2024 is going to be a “huge year.”

Finally, Meta CEO Mark Zuckerberg boasted on social media earlier this month that his company will have 350,000 Nvidia H100 GPUs—and almost 600,000 H100 equivalent GPUs based on total computing power—by the end of this year.

We’ll find out more when Meta, Amazon, and Apple report on Thursday, but all signs suggest that AI spending is still accelerating—no matter what stocks said on Wednesday.