MW JPMorgan Chase, Citi and Goldman rallies under scrutiny as earnings updates await

By Steve Gelsi

As earnings season kicks off on Tuesday, Wall Street seeks clues on whether big-bank stocks merit more gains after their recent outperformance

Second-quarter earnings updates from JPMorgan Chase & Co, Wells Fargo & Co. and Citigroup Inc. are due up on Tuesday after double-digit percentage advances in their stock prices in recent weeks, as Wall Street looks for clues on whether the sector merits further gains.

Reports on profits for the three months ended June 30 will follow Wednesday from Bank of America Corp. $(BAC.SI)$, Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS).

After the stock market's huge selloff in April on jitters surrounding the "liberation day" tariff announcement by President Donald Trump, bank stocks have outpaced the gains in the broad market, led by a 29.6% rally in Goldman Sachs stock in the second quarter. (See chart.)

The second-quarter average gain for the six bank stocks including JPMorgan Chase (JPM), Wells Fargo (WFC) and Citigroup (C) was 16.23%, well ahead of the 10.57% rise by the S&P 500 SPX.

The big-bank stocks also outperformed regional-bank stocks, with the SPDR S&P Regional Banking ETF KRE up just 4.47% during the quarter, the Financial Select Sector SPDR Fund XLF ahead by 5.14% and the KBW Nasdaq Bank Index BKX moved up by 13.99%.

The stocks have been hot early in the third quarter, now underway, with JPMorgan Chase, Goldman Sachs, Morgan Stanley and Wells Fargo shares all closing at record highs on July 3, according to Dow Jones Market Data.

Overall, the second quarter was eventful for the financial sector, as a lighter regulatory touch from the Trump administration started to be felt with a passing grade in the Federal Reserve's annual stress tests, as well as a proposal to ease leverage rules.

The U.S. Treasury market - an important metric for loan pricing and the value of bank balance sheets - also faced a volatile environment as the Fed pondered potential interest-rate cuts and investors fretted about the increase in the U.S. debt baked into Trump's "big, beautiful" tax and spending bill.

Also read: Treasury Secretary Bessent has a plan to bring down long-term yields. But will it work?

Geopolitical uncertainty continued in financial markets, as well, with Iran and Israel launching missile attacks as a new wrinkle in the Middle East conflict.

Heavy trading in bonds and equities during periods of stress in the quarter are expected to boost revenue for banks.

Investment-banking activity was helped by successful initial public offerings from stablecoin issuer Circle Internet Group Inc. $(CRCL.UK)$ and Chime Financial Inc. $(CHYM)$, which followed CoreWeave Inc.'s (CRWV) debut in March.

All of this has Wall Street scratching its head over data points that might help predict the path of big-bank stocks after the sector's strong gains.

To sustain gains in their stocks, the big banks, led by JPMorgan Chase, will have to show they're able to grow profits through the balance of the year, said Matt Stucky, chief portfolio manager of equities for Northwestern Mutual Wealth Management.

"If their earnings continue to grind higher, that'll keep the valuation paradigm more profit-oriented rather than on their tangible book value or other measures," Stucky told MarketWatch.

Based on price-to-earnings ratios, banks stocks are relatively cheap as compared with the broad equities market. However, if viewed by market capitalization relative to tangible book value, JPMorgan is trading at a multiple of three, which is a lofty level, Stucky said.

For now, banks continue to look strong as consumers and businesses manage to keep paying back their loans.

"Credit performance is the No. 1 thing you worry about, and it's been good," Stucky said.

JPMorgan's stock has thrived partly because of the company's ability to serve a wide range of customers and operate in any economy, while Morgan Stanley and Goldman Sachs have benefited from an increase in investment-banking activity and by growing their wealth businesses, he said.

The larger banks also have more of a regulatory tailwind because they stand to benefit more from any dial-back in capital requirements under the Trump administration, compared with regional banks, Stucky said.

JPMorgan Chase's outlook will be closely watched

JPMorgan Chase has been of particular interest to analysts, given its strong stock-price performance this year and its role as a relative haven against market instability. It's the largest U.S. bank.

On April 11, JPMorgan issued an outlook for 2025 net interest income of $90 billion excluding markets, flat with its view from three months earlier. If the normally cautious bank lifts its view, it could provide some inspiration for the stock.

Wall Street analysts have offered a diversity of views on the company's prospects.

KBW analysts last week upgraded JPMorgan Chase to outperform from market perform as part of its bullish view toward larger banks due to a "triple crown" of prospective benefits: deregulation, scale and consistency.

"Though JPM has recently outperformed and trades at healthy absolute multiples, it is actually right on top of its three-year premium and best-in-class companies rarely are cheap," said KBW analyst Christopher McGratty.

Less bullish was HSBC analyst Saul Martinez, who recently downgraded JPMorgan Chase's stock to reduce from hold and cut his view on Bank of America to hold from buy. He downgraded Goldman Sachs to reduce from hold.

"We think downside risks associated with still-elevated macro uncertainty, potentially slowing economic growth, and more interest-rate cuts through 2025 and 2026 are generally not factored into thestock prices of universal banks and brokers," Martinez said.

Overall, analysts have become less bullish on JPMorgan Chase's second-quarter earnings with the latest consensus estimate now at $4.48 a share, down from an estimate of $4.58 a share at the end of the first quarter, according to FactSet data. In the year-ago quarter, JPMorgan Chase reported earnings of $6.12 a share.

Analysts expect JPMorgan Chase's second-quarter revenue to weigh in at $43.9 billion, down from $51 billion in the year-ago quarter.

Wells Fargo's Q2 results will mark its first after the lifting of its asset cap

Also on Tuesday, Wells Fargo is scheduled to provide its first quarterly report since the Federal Reserve lifted its $1.95 trillion asset cap for the bank stemming from its fake-accounts scandal and other missteps.

See: Wells Fargo just got a green light from the Fed to grow. Here's what it means for its business and its stock.

For its second quarter, Wall Street analysts currently expect Well Fargo to post earnings of $1.41 a share, up from $1.33 a share in the year-ago quarter.

The latest estimate of $1.41 a share is now six cents below the earlier profit forecast for Wells Fargo of $1.47 a share at the end of the first quarter, according to FactSet data.

Analysts also expect Wells Fargo to generate second-quarter revenue of $20.76 billion, about flat with the year-ago level of $20.69 billion.

Second-quarter earnings and revenue estimates

Below are consensus earnings-per-share estimates for the second quarter for the largest six U.S. banks among analysts polled by FactSet, compared with reported earnings for the previous quarter and the year-earlier quarter.

   Largest 20 U.S. banks     Ticker symbol    Est. Q2 EPS  Q1 EPS  Q2 2024 EPS  Total assets ($bil) 
   JPMorgan Chase & Co.      JPM                    $4.48   $5.07        $6.12               $4,358 
   $Bank of America Corp(BAC-N)$.     BAC                    $0.86   $0.90        $0.83               $3,349 
   Citigroup Inc.            C                      $1.61   $1.96        $1.52               $2,572 
   Wells Fargo & Co.         WFC                    $1.41   $1.39        $1.33               $1,950 
   Goldman Sachs Group Inc.  GS                     $9.59  $14.12        $8.62               $1,766 
   Morgan Stanley            MS                     $1.98   $2.60        $1.83               $1,300 
                                                                                    Source: FactSet 

And the following are estimated figures for revenue (net interest income plus noninterest income) for the second quarter and actual numbers for the first quarter and the third quarter of 2024, as provided by FactSet.

   Largest six U.S. banks    Ticker symbol    Est. Q2 revenue ($mil)  Q1 revenue ($mil)  Q2, 2024 revenue ($mil) 
   JPMorgan Chase & Co.      JPM                             $43,968            $45,141                  $50,176 
   Bank of America Corp.     BAC                             $26,782            $29,193                  $26,641 
   Citigroup Inc.            C                               $20,925            $21,807                  $20,202 
   Wells Fargo & Co.         WFC                             $20,753            $20,497                  $20,794 
   Goldman Sachs Group Inc.  GS                              $13,510            $14,946                  $13,066 
   Morgan Stanley            MS                              $16,367            $17,699                  $14,998 
                                                                                                 Source: FactSet 

Projected sequential declines in earnings per share for the second quarter mainly reflect an expected decline in trading revenue that spiked during the first quarter.

The expected year-over-year decline in second-quarter earnings per share for JPMorgan Chase reflects a gain of $7.9 billion on the bank's sale of shares in Visa Inc. (V) in May 2024. That added $2.04 a share to the bank's EPS for the second quarter of 2024.

Philip van Doorn contributed.

-Steve Gelsi

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

July 14, 2025 08:07 ET (12:07 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.