By Parth Parikh,
Money & Investing Writer
This week, six of the largest banks in the United States released their third quarter financial statements, showing investors and critics how they are performing in the marketplace.
These financial statements consist of the income statements, which indicates net profits or losses, the balance sheets, known to prove if the company’s finances are balanced, and the cash flow statements, which maps out where a company’s cash is being moved around.
These statements are compared to the same quarter from the year before to indicate how a company is doing in comparison to the other banks in the industry.
Some banks came out with great reports, like Wells Fargo (NYSE: WFC), who released increases in both revenues and profits, tallying $23.9 billion in revenue compared to $23.21 from the previous year and profits of $5.8 billion, which was up 1.2 percent.
Unfortunately, some banks failed to perform at their highest, one being Goldman Sachs (NYSE: GS), who saw a drop in revenues from $8.39 billion to $6.86 billion and in profits from $2.14 billion to $1.33 billion.
JP Morgan Chase and Co. (NYSE: JPM) released their financial statements for the third quarter, reporting an increase in profits from $5.57 billion to $6.8 billion.
On the other hand, they also reported a loss of seven percent in revenues to $22.7 billion and a six percent loss, or $260 billion, in assets during the past quarter.
As a result, shareholders of the company in the stock exchange received $1.32 per share, which fell below analyst expectations who believed JP Morgan would be giving $1.37.
Bank of America (NYSE: BAC) put up similar results, albeit on a much smaller scale.
The Charlotte-based bank posted a fall in revenues from $21.21 billion to $20.6 billion, a 2.5 percent drop, while also flaunting a boost in profits from $168 million last year to $4.5 billion this quarter.
Many investors were thrilled to see the profit jump after last year’s meltdown when Bank of America was buried in settlements and fines stemming from the aftermath of the 2008 financial crisis and a lesser-known foreign exchange issue involving their high-profile Merrill Lynch division.
The obvious explanations for the mixed reviews in banks’ reports is the devaluation of the Chinese currency, along with the financial shock that soon followed, and the Federal Reserve keeping interest rates grounded instead of beginning the rate hike after eight years.
In mid-August, due to the lack of exports and numerous missteps by the Chinese government to control the situation that followed, the Chinese yuan was degraded, making the value of one yuan much less than the US dollar.
This resulted in a stronger US dollar that hurts banks’ profits that rely on both domestic and international revenue.
A few weeks later, the Federal Reserve decided to ground the interest rates after keeping them at .25 for the past eight years.
Those two episodes, coincidentally happening one after the other, startled many of the companies’ overall business and their portfolios.
The devaluation of the Chinese currency affected the foreign investments that banks own stakes in and the Fed keeping rates prevented the growth of those businesses and portfolios, possibly those that could have helped banks recover the losses in the Chinese devaluation.
With the fourth quarter seeming more promising, only time will tell how the banks and the overall market will do in the coming month.
A version of this article appeared in the Tuesday, October 20th print edition.
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