Tuesday was a challenging day for major banking stocks despite the announcement of a less stringent capital requirement proposal by U.S. regulators. The new plan, which is set to halve the initial proposed requirements, was overshadowed by cautious remarks from bank executives at a New York conference hosted by Barclays.
Shares of JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C), and Goldman Sachs (GS) all declined on Tuesday, although the downward pressure moderated by the afternoon. Year-to-date, these major banks have seen a more than 12% increase in their stock prices.
Here’s a summary of key points from the Barclays conference:
Bank of America CEO Brian Moynihan indicated that investment banking fees are expected to remain largely unchanged compared to the previous year, while trading revenue should see a modest increase in the low single digits. He noted that net interest income, a critical revenue metric for the bank, had “troughed” in the second quarter but is now on the rise. Moynihan also addressed the recent reduction of Bank of America shares held by major investor Berkshire Hathaway (BRK-A, BRK-B), highlighting uncertainty about Berkshire CEO Warren Buffett’s actions.
JPMorgan Chase JPMorgan, the largest U.S. bank, is on track to meet its net interest income and expense targets for the year. However, COO Daniel Pinto expressed concerns that analysts may be overly optimistic about the bank’s 2025 earnings projections. The bank’s stock fell by up to 6.8%, its largest intraday drop since June 2020, following similar cautionary remarks from CEO Jamie Dimon and CFO Jeremy Barnum about recent over-earnings.
Goldman Sachs CEO David Solomon forecasted a 10% decline in trading revenue for the third quarter compared to the previous year. Additionally, Goldman Sachs will face a $400 million pre-tax earnings hit from its credit card partnership with General Motors, which is being offloaded as part of a strategy to withdraw from consumer banking. Despite a strong rebound in deal-making activity earlier in 2024, Solomon expressed confidence in the firm’s positioning.
Citigroup CFO Mark Mason projected a $200 million increase in credit costs from the second quarter and a 4% drop in trading revenue for the third quarter due to recent bond market volatility. On a positive note, investment banking is expected to grow by 20% year over year, marking its fourth consecutive quarter of growth.
In addition to these developments, banks and investors are reviewing the revised capital requirements unveiled by regulators, which propose a 9% overall increase in capital levels, down from the initial 20% increase previously considered. Bank of America’s Moynihan compared the adjustment to a situation where the perceived severity is reduced but remains significant.
