For the most part, the largest U.S. bank holding companies suffered through a dismal first quarter, as the profits of nearly every one of them took a hit compared with the first quarter of 2015.
For example, Goldman Sachs and Morgan Stanley each saw their profits decline by more than 50 percent from Q1 2015 to Q1 2016. Citi’s net income dropped over-the-year from $4.8 billion to $3.5 billion in Q1, and Bank of America’s dropped by 13 percent down to $2.7 billion. Wells Fargo and JPMorgan Chase also reported over-the-year earnings declines for Q1.
In slightly more than a week, the mortgage industry will find out if the banks were able to bounce back in Q2, starting with the release of JPMorgan Chase’s second quarter earnings statement on the morning of Thursday, July 14. The following day, Friday, July 15, the Q2 earnings statements of four financial institutions will be released: Wells Fargo, U.S. Bank, PNC, and Citi.
Bank of America and Morgan Stanley will follow with their respective Q2 earnings statements on Monday, July 18, and Goldman Sachs will release theirs on Tuesday, July 19.
The banks may be in a good position to increase profitability for Q2. The nation’s 33 largest bank holding companies all showed improved capital levels in the recent stress tests conducted by the Fed. According to the Fed, the 33 banks had added a combined total of more than $700 billion in common equity capital. The 33 bank holding companies tested, which hold more than 80 percent of domestic banking assets, showed they would take losses of about $385 billion when tested for their ability to lend in a hypothetical severe economic scenario.
The Fed then announced on June 29 that it did not reject the capital plans for all bank holding companies except for Santander and Deutsche Bank. The Fed did not reject Morgan Stanley's capital plan, but did ask the investment banking firm to resubmit its plan after correcting some deficiencies in the plan found by the central bank.
The earnings statements for non-bank mortgage servicers such as Ocwen Financial, Nationstar Mortgage, and Walter Investment typically follow a week or two after the bank holding companies release their statements. All three posted net losses of more than $100 billion in Q1; the only one of the three that was profitable for the full year of 2015 was Nationstar.
Q2 earnings schedule
Thursday, July 14: JPMorgan Chase
Friday, July 15: Citi, PNC, U.S. Bank, Wells Fargo
Monday, July 18: Bank of America, Morgan Stanley
Tuesday, July 19: Goldman Sachs