JPMorgan & Wells Fargo’s Earnings Confirm The Banking Recovery Is On Track

April 13th, 2012 by Trefis Team
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Both JPMorgan Chase (NYSE:JPM) and Wells Fargo (NYSE:WFC) showed some reversal of fortunes with better-than-expected earnings for the first quarter of the year. JPMorgan, the country’s largest bank in terms of assets, reported a net income of $5.4 billion on revenues of $27.4 billion. [1] On the other hand, Wells Fargo continued its record run, with an unprecedented $4.2 billion in quarterly earnings from revenues of $21.6 billion. [2] The earnings figures for both the banks are notably significant because of the improvement seen across all operating divisions after two particularly difficult quarters for banks.

See our full analysis for JPMorgan | Wells Fargo

We are currently updating our analysis for both banks, and will update our price estimate for them shortly. Our update will factor in the effect on the fair value of their shares given their better than expected performance, as well as their recently announced plans to return more cash to shareholders.

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JPMorgan’s Investment Banking and Retail Financial Services Businesses Clear Winners

After a dismal performance over the latter half of 2011, JPMorgan’s investment banking operations managed to rope in $7.3 billion in revenues for this quarter – almost 70% more than the figure for the last quarter. This amounts to earnings of almost $1.7 billion for the division, despite a $0.9 billion net loss from the revaluation of its own debt.

The bank also did exceedingly well on the traditional banking front, with the Retail Financial Services unit growing revenues by 20% over last quarter and 40% over the first quarter of 2011. This translates to earnings of almost $1.8 billion from the division.

Mortgage Banking Steals The Show For Wells Fargo

Wells Fargo continues its remarkable run which saw it post record revenue figures for full year 2011, with another record performance for Q1 2012. The bank continues to grow on the strength of its robust mortgage banking business, which originated $129 billion worth of loans this quarter – up from $120 billion in Q4 2011. The bank also boasts of a residential mortgage servicing portfolio worth $1.9 trillion.

Notably, Wells Fargo also completed the integration of Wachovia this quarter – another milestone for the bank with the largest market cap.

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Notes:
  1. 1Q12 Earnings Press Release, JPMorgan Investor News, Apr 13 2012 [↩]
  2. Wells Fargo Reports Record Quarterly Net Income, Wells Fargo Press Releases, Apr 13 2012 [↩]