October 13, 2020

Big Banks Miss Net Interest Income and Net Interest Margin Expectations

by David Aurelio.

The unofficial kickoff to the 20Q3 earnings season occurred today, Oct. 13, when the S&P 500 banks industry’s Citigroup Inc (C.N), First Republic Bank (FRC.N), and JPMorgan Chase & Co (JPM.N), delivered quarterly results. Analysts had been expecting declines in both net interest income (NII) and net interest margin (NIM) for the banks industry. However, expectations were too high for the large diversified banks sub-industry constituents, as both Citigroup and JPMorgan missed analysts’ expectations for these metrics. Citigroup reported NII of $10.49 B vs. the consensus of $10.61 B and NIM of 2.03% vs. an expectation for 2.17% while JPMorgan reported NII of $13.01 B vs. an anticipated $13.41 B and a NIM of 1.82% came in below the expected 1.92%. Conversely, Regional Bank, First Republic’s NII of $830.28 M beat analysts’ expectations for $801.90 M and NIM of 2.71% came in above the anticipated 2.67%.

Analyst currently expect that the banks industry will see NIM’s contract to 2.13% in 20Q3 from 2.64% in the prior year. Regional banks are expected to see NIM’s compress to 2.83% from 3.19% and Diversified Banks are expected to shrink 1.98% from 2.53%. While the banks industry is expected to see 20Q3 year-over-year NII decline 6.9%, this is primarily driven by the diversified banks sub-industry’s expected 12.0% decline because the regional banks sub-industry is expected to see NII increase 13.1%.

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