Research Market strategy
By Swissquote Analysts
Published on 17.01.2022
Morning news

Pandemic Profits Begin to Ebb at America’s Biggest Banks

Topic of the day

The tumultuous pandemic economy sent big-bank profits to great heights. They’re coming back down to earth. Fourth-quarter profit fell 14% at JPMorgan Chase & Co. and 26% at Citigroup Inc., ending what had been a streak of big gains for most of 2021. Revenue didn’t budge much, but expenses rose. JPMorgan shares fell 6.2% in midday trading, and Citigroup fell 2.5%. Banks have enjoyed unparalleled growth during the pandemic, buoyed by a deal-making boom, market volatility that supercharged trading arms and a housing market that made mortgage lending more profitable than ever. Trading revenue fell 11% at JPMorgan and 17% at Citigroup, dragged down by declines in fixed-income trading. JPMorgan logged a profit of $10.4 billion, or $3.33 per share. Citigroup posted $3.2 billion, or $1.46 per share. Both beat the expectations of analysts polled by FactSet. Revenue for JPMorgan was roughly flat at $29.3 billion, missing expectations. Revenue rose 1% to $17 billion at Citigroup, beating expectations. Still, for the full year, results were up sharply from the pandemic. JPMorgan blew away its prior record profit, posting $48.3 billion. Citigroup nearly doubled its net income to $22 billion. Wells Fargo & Co., which also reported Friday, notched an 86% increase in fourth-quarter earnings. Its year-ago results were hurt by a restructuring charge and a charge tied to customer remediation for its fake-accounts scandal. Revenue rose 13%. The outlook for banks remains strong. Shares of JPMorgan Chase slid $10.34, or 6.1%, to $157.89, and Citigroup dropped 85 cents, or 1.3%, to $66.93. Wells Fargo bucked the trend, adding $2.06, or 3.7%, to $58.06, after the bank reported that profit soared 86% in the final three months of 2021.

Swiss stocks

The Swiss stock market ended the last trading day of the week with losses. Among others, the recently sought-after financial stocks recorded slight price declines. CS Group and UBS went down by 0.4 and 0.7 percent, respectively. Insurers Swiss Life (-0.1%) and Swiss Re (-0.4%) took isolated profits ahead of the weekend. The SMI was down 0.8 percent to 12,526 points. Among the 20 SMI stocks, 16 price losers and four winners faced each other. 29.75 (previously: 30.2) million shares were traded. Holcim shares declined by 0.5 percent. Davy analysts downgraded the shares to "hold" from "outperform." Cement producers tried to develop strategies in order to meet ESG criteria (environmental and social standards and good corporate governance), but so far they failed.

International markets


European stocks fell Friday, with technology bearing the brunt of losses on the heels of heavy losses for that sector on Wall Street amid worries over Federal Reserve action to control inflation. The Stoxx Europe 600 index dropped 1% to 481.2 points. In Paris, the CAC 40 and the SBF 120 lost 0.8% each. In Frankfurt, the DAX 40 gave up 1%, while the FTSE 100 gave up 0.2% in London. For the week as a whole, the Stoxx Europe 600 lost 1.1%. EDF shares slid 14.6% after pulling guidance. EDF was the worst performer on the Stoxx Europe 600, as the French state-controlled utility late on Thursday pulled its guidance for the year, saying the government's new moves to curb higher electricity bills will have an estimated impact of up to 8.4 billion euros ($9.62 billion). Elior lost 6.2% as Moody's downgraded the catering group's corporate family rating (CFR) from "Ba3" to "B1", with a stable outlook. The German software company SAP (stable in Frankfurt) published Thursday evening better than expected financial results for the fourth quarter. SAP reported that revenue from its cloud-computing business rose 28% in the last quarter. Shares in Currys dropped 6.85% after the U.K. electrical-goods retailer reported lower demand during its peak Christmas period and downgraded full-year adjusted pretax profit guidance.

United States

The stock market’s winter selloff deepened this week, pushing all three major indexes further into the red for 2022. The S&P 500 and Dow Jones Industrial Average both fell a second straight week, while the Nasdaq Composite has been down the last three. Lackluster earnings from some big U.S. banks, along with weak retail sales and manufacturing data, sent most of the market lower again on Friday until a late-session buying rush pushed the S&P 500 and Nasdaq back into positive territory. The S&P 500 added 3.82 points, or less than 0.1%, to 4662.85, and the Nasdaq gained 86.94 points, or 0.6%, to 14893.75. The Dow fell 201.81 points, or 0.6%, to 35911.81. The late Friday turnaround wasn’t enough to avert another down week. The S&P 500 and Nasdaq ended up falling 0.3% over the last five trading days, while the Dow shed 0.9%. Markets are closed Monday for Martin Luther King Jr. Day, shortening next week’s trading schedule. On Friday, the first dose of fourth-quarter corporate earnings reports gave investors a sobering outlook on corporate growth this year. Quarterly profits fell by double-digit percentages at JPMorgan Chase and Citigroup, ending a hot streak of big gains for most of 2021. BlackRock posted higher quarterly profit, and market gains lifted the investment firm’s assets under management above $10 trillion. Despite that, its shares declined $18.98, or 2.2%, to $848.60. Manufacturers, material firms and consumer discretionary stocks were also down following the economic data. Besides that, Sherwin-Williams declined $8.93, or 2.8%, to $308.46 after the paint maker lowered its guidance, citing a shortage of raw materials amid supply-chain and labor constraints. Some buying of large-cap growth stocks gave the market, and the Nasdaq, some support, as investors returned to a trade that tends to work well during periods of economic uncertainty. Facebook parent Facebook, Microsoft, Tesla and Netflix all gained more than 1%. Energy stocks jumped 2.4%, getting a boost from a climb in oil prices.


The stock markets in East Asia closed mixed at the start of the week. While the Nikkei gained 0.7 percent on the Tokyo Stock Exchange, the Hang Seng Index in Hong Kong lost 1.1 percent, weighed down by property stocks. Country Garden Holdings fell 8.1 percent, Longfor Group lost 2.6 percent. Meanwhile, in mainland China, the Shanghai Composite gained 0.6 percent after the Bank of China cut interest rates on the one-year medium-term credit facility and seven-day reverse repurchase agreements by 10 basis points each to 2.85 and 2.1 percent, respectively. In South Korea, the Kospi declined 1.5 percent. Daewoo Shipbuilding & Marine Engineering buckled 7.5 percent, reeling from the European Union's veto against its merger with Hyundai Heavy Industries (-3.3%).


Investors continued to sell bonds, pushing the yield on the benchmark 10-year U.S. Treasury note up for a fourth straight week, notching its biggest rise over that stretch since mid-March. Expectations for an interest-rate rise as soon as March have caused some investors to sell government bonds, pushing up yields. The yield on the benchmark 10-year Treasury note ticked up to 1.771% Friday, from 1.708% Thursday.


Davy lowers Holcim to Neutral (Outperform)
Berenberg raises Stabilus target to EUR 84 (78) - Buy
Hauck&Aufhäuser lowers target Elringklinger to EUR 25 (28) - Buy

Produced by MBI Martin Brückner Infosource GmbH & Co. KG on behalf of Swissquote. All news is acquired with journalistic accuracy. No liability is assumed for delays or errors.