Why Are Big Banks Doing Better Than Expected?

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There was a common thread between the second-quarter earnings of three major banks, which all reported over the past few days. JPMorgan (NYSE:JPM), Citigroup (NYSE:C), and Goldman Sachs (NYSE:GS) all released earnings that beat market expectations — smashed them, in some cases.

JPMorgan reported profit of $6 billion, or $1.46 per share, on revenue of $25.3 billion. This beats Wall Street expectations for earnings of $1.29 per share on revenue of about $23.8 billion. Within investment banking, profit was down 31 percent to $2 billion from a year ago. Revenues from fixed-income trading fell 15 percent to $3.5 billion, due to “historically low levels of volatility and lower client activity across products.”

Adjusting for legal charges and accounting changes, Citigroup reported earnings of $1.24 per share, beating the mean analyst estimate of $1.05 per share. Revenues at the bank were down 5.6 percent on the year to $19.34 billion but still beat analyst expectations for $18.93 billion.

And finally, trading giant Goldman Sachs reported a 5.5 percent increase in net profits to $2.04 billion, or $4.10 per share, in its second quarter, beating the $3.05 a share estimates of Wall Street analysts.