The Kids Aren’t Alright (Banks, However, Are)
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We're digging up bank earnings and trying to figure out between Robin Hood, beer, and cannabis if the kids are truly doing all right. This is Motley Fool Money.
It's Tuesday, October 14th. Welcome to Motley Fool Money. I'm your host, Emily Flippen, and today I'm joined by analysts Jason Hall and Jeff Santoro. Guys, I am really excited to get into some of the shifting trends that we've been seeing over the course of the past year. That includes a 250% rise in Robinhood shares, as well as beer and alcohol consumption reaching all-time lows in the United States. But first, I know we have some very important housekeeping to do with the news of the day and bank earnings. I mean, I guess we really should eat our veggies before moving straight to dessert, right? And Jason, every quarter, a slew of banks report quarterly results. That really kicks off earnings season.
And you're a better analyst than Jeff and myself because you actually look forward to these reports every quarter. But... Today, we're seeing a lot of broad-based beats, it seems. Dealmaking, trading, they're all running hot in the first full quarter here. When you look at these reports, what do you think investors should be taking away?
First off, I'd say a lot of people are going to challenge whether they would consider somebody that looks forward to bank earnings to be better than somebody like yourself, Emily. I just wanted to get that out there. This is definitely important, what we're dealing with. We got results from three of the big four U.S. banks, JPMorgan, Wells Fargo, Citi reported, and of course, the investment banking giant, Goldman Sachs. They all delivered really strong results last quarter. Citi and Wells, their businesses, for different reasons, have long struggled. We've seen some serious work from Jane Fraser, CEO of Citi, working hard to tear down this unwieldy low-profit empire that her predecessors built and try and turn Citi into a leaner, more profitable bank.
We saw some of that progress this quarter. Really strong revenue and earnings growth. even after the impact of a nearly $3.25 billion write-down tied to the partial sale of Banamex, its international subsidiary. Credit quality is also holding up really well. Return on tangible equity is improving. It's worth noting that it's still way below its peers, but it's moving in the right direction. If we look at Wells, similarly, it's on a big upswing. It just reported its first full quarter free of the asset cap that the Fed imposed. You go back to 2018 when that asset cap was put in place, that's part of the punishment. You guys remember the fake account scandal? Unfortunately. We're finally free of that, and Wells can start growing its assets again.
Earnings were up 9%. That was actually mostly from fees, including investment banking and card fees. Now, net interest income, that's the money it makes from loans after paying interest on deposits, that was up 2%. Other parts of the business were accounting for a lot of the growth. Credit card balances were up slightly. That's something that JPMorgan Chase, which is the largest credit card issue, also noted.
JP Morgan has always been the exception to the rule here for banks in terms of its relative performance. I know, Jeff, every single time we have these banks reporting earnings, everybody is itching to know what CEO Jamie Dimon had to say. It seems like he always has a hot take for us. Did he say anything that piqued your interest?
Well, every time the banks report, I'm interested to hear what Jamie Dimon says, because I feel like he's often bearish when things are going well, but it never seems like the doom and gloom that he predicts actually comes to pass. I know, Jason, you're going to talk about what he had to say a little bit, but nobody ever seems to call this out. That's probably a different podcast, but I'm curious what you think, Jason.
Yeah, Jeff, I know you wanted to say that. Jamie Dimon's always wrong with his bearish calls. I don't think he's really making predictions as much as just trying to buffer the worst tendencies of the market to swing to those extremes of sentiment, either bearish or bullish.
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