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Big bank earnings meet analyst expectations amid recession fears

Yahoo Finance's Alexandra Semenova discusses the mixed results so far for the financial sector as bank earnings have largely come in line with expectations though profits have taken a hit.

Video Transcript

AKIKO FUJITA: All this as earnings continue to roll on. We've already heard from several of the major banks. Goldman Sachs the latest to report its quarterly results, coming out with a beat. But how did these big banks compare to one another in the latest quarter? Let's bring in Yahoo Finance's Alexandra Semenova here with me at the desk. We got all the big banks out of the way. In general, a pretty positive outlook-- I don't know if we should say positive outlook, but a beat. The expectations were fairly low.

ALEXANDRA SEMENOVA: Yeah, absolutely, Akiko. I have to start out by saying it's really been a mixed bag for financials, as they've been reporting their results. On one hand, the banking industry is still doing just fine, compared to what analysts are expecting to see from some other sectors that are set to report in the coming weeks. It's really just the year over year comparisons that have been really tough after an incredibly lucrative 2021. And they're still meeting analyst expectations for the most part.

But on the other hand, we are seeing bank profits taking a huge hit, driven primarily by two things-- lower dealmaking activity that is really putting a dent in investment banking revenues and them setting aside funds for potential loan losses, which is also weighing on their profits as they expect the possibility of an economic recession.

But there are a few, of course, that have held up better than others. Goldman Sachs, yet again, was a standout today, beating on all fronts, coming in far better than Wall Street had expected. Profit was down 43%, but that was partially offset by an 11% jump in trading activity, led by fixed income trading specifically. So again, the expectations were low, and this was very much a better than feared situation with the big banks.

Bank of America also posted a drop in profits year over year. However, it did see an earnings per share beat compared to what Wall Street was expecting. Also benefiting from better than expected trading revenues.

AKIKO FUJITA: So those are kind of the winners, as you put it. The biggest loser?

ALEXANDRA SEMENOVA: Well, one more winner we have, JPMorgan actually saw a drop in quarterly net income. But Oppenheimer analysts said it was a blowout quarter, saying that blowout would be an understatement because analysts were really preparing for the worst when it came to this. But then you look at Citigroup. Citigroup profit fell 25%. Revenue, however, rose 6%. Again, it beat Wall Street estimates.

Morgan Stanley was the only bank that really disappointed Wall Street, missing expectations and reporting profit that fell 29%. So that was one of the banks that saw a much more challenging quarter compared to its peers.

AKIKO FUJITA: OK, Alexandra Semenova with the roundup for us. Thanks so much for that.