Third quarter earnings season kicks off for the largest banks on Friday, October 14, with the release of reports for Citigroup, JPMorgan Chase, PNC Financial Services, and Wells Fargo.
What will the Q3 earnings reports hold for these banks? A quick recap of how each of them fared in Q2:
Chase’s mortgage banking new revenue climbed by 5 percent over-the-year in Q2, from $1.83 billion up to $1.92 billion driven by portfolio growth and higher production revenue. The gains were largely offset, however, by lower servicing revenue. The income for the consumer & community banking segment in Q2 was $2.7 billion, an increase of 5 percent over-the-year.
Wells Fargo reported a slight decline in net income year-over-year in Q2 (from $5.7 billion down to $5.6 billion, of $1.01 per share) but did report an uptick in net income from Q1 ($5.5 billion) and a 4 percent increase in revenue up to $22.2 billion. Though overall mortgage banking revenue was down, residential mortgage loan originations increased by 43 percent over-the-quarter, up to $63 billion. Residential mortgage applications shot up over-the-quarter from $77 billion up to $95 billion in Q2, and total loans were up by 1 percent over-the-quarter to $957.2 billion, partially driven by the growth in single-family first mortgage loans.
Citigroup posted a net income of $4 billion in Q2—down from $4.8 billion in the same quarter a year earlier, a 14 percent decline. According to Citi, the decline in net earnings was driven by lower revenues and a higher effective tax rate, partially offset by lower cost of credit and lower operating expenses.
PNC Financial Services Group’s net income for Q2 was $989 million, up from $943 million in the first quarter but down from $1.04 billion from Q2 of 2015. Residential mortgage banking net income accounted for about $43 million of Q2’s net income, more than double the total from Q2 2015 ($19 million).
Tuesday, October 11—Quicken Loans Home Price Perception Index, September 2016
In August, residential home appraisals were an average of 1.56 percent lower than what refinancing homeowners expected while home values spiked by more than 8 percent from the previous August.
“While a one and a half percent difference may not seem like a big disparity of home value opinions, the gap could cause problems, especially in areas with an even wider difference,” said Quicken Loans Chief Economist Bob Walters. “In some portions of the Midwest, where appraisals are averaging 2-3 percent less than what was expected, this will often lead to restructuring a refinance or the homeowner needing to bring a few more thousand dollars to the closing table.”
This week’s schedule
Tuesday, October 11
Quicken Loans Home Price Perception Index, September 2016
Friday, October 14
Citigroup Q3 Earnings
JPMorgan Chase Q3 Earnings
PNC Financial Services Q3 Earnings
Wells Fargo Q3 Earnings