Wall Street: Eyes on Goldman as banks miss earnings

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Happy earnings Monday! It's Aaron Weinman here. Citi stood tall, but peers like JPMorgan, Bank of America, and Wells Fargo missed estimates as lenders come to grips with weak dealmaking and high inflation.

Goldman Sachs is reporting today.


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Citi's Jane Fraser

Citigroup's second-quarter profit and revenue beat analysts' expectations on Friday. Its numbers were a bright spot amid a series of misses for US lenders.

Citi reported $19.6 billion in revenue for the quarter, an 11% jump on the first quarter. This was ahead of analysts' predictions of $18.2 billion, according to a survey conducted by Refinitiv.

The bank benefited from more interest income (thanks to rising rates), and logged strong results in its trading and institutional services business.

JPMorgan, Morgan Stanley, Bank of America and Wells Fargo all missed analysts' marks.

Wells — which reported $17 billion in revenue versus a $17.5 billion estimate — said its second-quarter profit declined 48% from a year ago. Chief Executive Charlie Scharf said he expected credit losses to increase in the future.

"Citigroup appears to be one of the highlights," David Wagner, portfolio manager at Aptus Capital Advisors, said. "It was all treasury and trading solutions — helping international businesses manage payments. This business line was firing on all cylinders, insulating all of the losses from the investment-banking segment."

Indeed, investment banking was a sour spot for most banks. JPMorgan logged $1.35 billion in investment-banking revenues, down 61% on the same quarter in 2021, and Morgan Stanley recorded $1.1 billion in revenue, down 55% for the same period last year. Bank of America's investment banking arm has also seen a slowdown in activity, as the bank's second-quarter earnings came in lower than expected this morning

To be fair, 2021's record year was also going to be a outlier. An economic slowdown meant that 2022 was poised to be a harsh reality check for investment banks.

Wall Street rushed to hire as transaction volumes swelled, and some bankers pocketed hefty bonuses — and bought some shiny new toys — just a few months ago. But with dealmaking on the fritz, these same bankers are bracing for job cuts.

"September and October is gonna be a hot season for sure," one capital-markets banker said of the potential for cuts.

Capital markets are likely to come under the microscope as IPOs grind to a halt and bond sales slow. Investors, borrowers, and bankers are all coming to terms with weaker company valuations, choppy stock markets, and rising borrowing costs.

Goldman Sachs is reporting today.

In other news:

Coinbase man shadow

2. Coinbase is temporarily shutting down its US affiliate-marketing program. In leaked emails to Insider, the crypto exchange said it plans to relaunch the program in 2023.

3. Goldman Sachs-backed AlphaSense is laying the foundation for an IPO. After raising new capital at a $1.7 billion valuation, it has now set sights on growth in Asia.

4. Bank of America was fined $225 million for "botching" the payment of unemployment benefits. The bank was fined $100 million by the Consumer Financial Protection Bureau and $125 million by the Office of the Comptroller of the Currency.

5. Ken Griffin's Citadel plans to open an office in Palm Beach, according to Bloomberg. The firm — which announced that it's moving headquarters to Miami from Chicago last month — will take space in Palm Beach's former Neiman Marcus building.

6. Tiger Global-backed Chinese grocery delivery firm Missfresh faces a fight for survival. The Financial Times reports that the company, which pulled in more than $1 billion in funding and gained a $3 billion valuation, now has a market value of $88 million.

7. The cofounder of MetaMask likened crypto to gambling. Aaron Davis' popular crypto wallet company boasts 30 million users, yet he thinks it's "extremely dangerous" to call crypto the future of finance.

8. Vue Cinema will be taken over by its lenders, Bloomberg reported. Vue's Canadian pension fund owners, Alberta Investment Management and Omers, are exiting the cinema chain.

9. We were wrong about the Great Resignation. Workers remain powerless, and with a recession on the horizon, things could get worse.

10. This economist who has argued against doom and gloom had a change of heart. Here's why he thinks the US economy is headed toward a recession.

Done deals:

  • NOVA Infrastructure has completed a $565 million fund raise. The NOVA Infrastructure Fund I received commitments from pension funds, insurance companies, family offices, and asset managers. NOVA will target investments in environmental services, transportation, and energy, among others.
  • Private-equity firm TA Associates has made a growth investment in Intelerad, a medical imaging company. TA joins Intelerad's majority investor Hg and ST6, a minority investor focused on the software space.

Curated by Aaron Weinman in New York. Tips? Email aweinman@insider.com or tweet @aaronw11. Edited by Hallam Bullock (tweet @hallam_bullock) in London.

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