Q1’22 Trending Earnings Topics Recap – Week of April 11th, 2022

Q1'22 Trending Earnings Topics Recap - Week of April 11th, 2022

Welcome back to our weekly update on trending topics, macro trends and key management commentary with highlights from earnings call transcripts of S&P 500 companies for the Q1’22 earnings season. With JP Morgan, Bank of America, U.S. Bancorp, Citigroup and PNC Financial Services among the larger companies that reported results last week, economic topics are predominant. Here are some key trending topics that emerged during earnings updates from the week of April 11th, 2022:


Companies across the board are highlighting possible business impacts over the past few months that were directly attributable to the recent geopolitical turmoils, specifically revolving around the Russian invasion of Ukraine

Expenses of $19.2 billion were up approximately $500 million or 2%, predominantly on higher investments and structural expenses largely offset by lower volume and revenue related expenses. Credit costs were $1.5 billion for the quarter. We built $902 million in reserves driven by increasing the probability of downside risks due to high inflation and the war in Ukraine as well as builds for Russia-associated exposures in CIB and AWM. Net charge-offs of $582 million were down year-on-year and comparable to last quarter and remain historically low across our portfolios.

  • Jeremy Barnum – JPMorgan Chase & Co., Chief Financial Officer

The lingering impact of the pandemic on supply chains and business opportunities, inflation and Fed reduction of monetary accommodation, the impacts of the Russian-Ukraine war both on a first-order effect and second-order effects. We do remain mindful of all of these. So could a slowdown of the economy happen? Perhaps. But right now, the size of the economy is bigger than pre-pandemic levels, consumer spending remains strong, unemployment is low and wages are rising…On Russian counterparty risk, our teams have done a tremendous job shutting down our exposures and at the end of the quarter we had de minimis needing less than $20 million counter by exposure with a single Russian-based counter party. And very limited impacts from – and any of those impacts in our trading results for this quarter. So responsible growth has served us well here, and as you might note, after the 2014 Crimea conflict, we intentionally do self-exposure and Russia has not been in our top 20 country risk exposure table since 2015.

  • Brian T. Moynihan – Bank of America Corp., Chairman & Chief Executive Officer

As I wrote to shareholders last month, Russia’s invasion of Ukraine has created a humanitarian tragedy and is impacting not only geopolitics but also the global economies. It is going to fundamentally alter the path of globalization that we’ve seen over the past 30 years. The flow of goods and people across borders will still be critical to economic growth, and new technologies will continue to shrink geographic distances, but countries and companies are reevaluating their interdependencies in a way that we have not seen since the end of the Cold War.

As a fiduciary, BlackRock is working to understand how these structural changes will impact our client portfolios and we will help them pursue their long-term financial goals…Over the last two months, following Russia’s invasion of Ukraine, BlackRock held over 200 client engagements and hosted Market Update calls attended by more than 4,600 clients.

  • Laurence Douglas Fink – BlackRock, Inc., Chairman & Chief Executive Officer

As you’ve seen, we had a solid start to the year as we grew loans and securities, controlled expenses, and our credit quality reserves and capital levels remain very strong. As we previously disclosed, non-interest income was below our expectations for the quarter. And while we had expected fees to be down sequentially, reflecting typical first quarter seasonality, the decline actually exceeded normal interest rate volatility, and probably the Russian-Ukraine conflict adversely impacted certain of our capital markets businesses among other areas.

As we look forward, we’re clearly in an environment of uncertainty here. We’re also in an environment with rising interest rates, which benefit banks with increased loan demand, which benefit banks. And in PNC’s case, a business – or a bank that never changed its credit box when credit terms got really easy, a business that has a very – or a bank that has a very solid mix of fee-based businesses, and importantly, a bank that has substantially expanded its geographic presence.

  • William Stanton Demchak – The PNC Financial Services Group, Inc., Chairman, President & Chief Executive Officer

Prominent banking institutions across the S&P 500 sector are well-positioned and projecting a positive net interest income/revenue outlook in preparation of the anticipated federal rate hikes, while noting positive NII growth over the past quarter due to the initial rise in interest rates

Company earnings are also generally strong. Credit is widely available, and our customers’ uses of their lines of credit is still low, i.e., they have capacity to borrow more. We are all focused on the ability of the Fed to use our tools to reduce inflation. We all know that will take interest rate hikes and a reduction of the balance sheet. We predict it will slow the economy from 3% growth in 2022 to a little below 2% in 2023. That is back to track. So with interest rate hikes comes better NII. Could the Fed have to push harder to sell inflation? Perhaps. That is why we’ve done stress tests each quarter to look at scenarios to see what would happen in a highly inflationary environment. If rates move up fast, are there implications to capital? Sure, and it’s hots on this quarter. But in the context of the capital built, those impacts are manageable.

  • Brian T. Moynihan – Bank of America Corp., Chairman & Chief Executive Officer

We have broad-based loan growth with both our consumer and commercial portfolios growing from the fourth quarter, while net interest income was down modestly from the fourth quarter, driven by fewer days in the quarter, it grew 5% from a year ago.

Higher interest rates along with our expectations for continued loan growth should drive higher net interest income growth that we anticipated at the beginning of the year. Mike will provide more details regarding our current view later on in the call. However, the increase in rates negatively impacted our mortgage banking business. The mortgage origination market experienced one of its largest quarterly declines that I can remember, and it will take time for the industry to reduce excess capacity.

  • Charles William Scharf – Wells Fargo & Co., President, Chief Executive Officer & Director

Throughout the quarter, we took actions in the investment securities portfolio to temper the immediate impact to capital from higher interest rates. And we expect higher rates to be both a positive for fees and net interest revenue going forward. Emily will discuss the details for the quarter shortly, but let me briefly touch on a few business highlights.

  • Thomas P. Gibbons – The Bank of New York Mellon Corp., Chief Executive Officer & Director

Investment and other revenue was $70 million. And net interest revenue increased by 7%, reflecting higher interest rates on interest-earning assets, change in mix and lower funding expense. 

  • Emily H. Portney – The Bank of New York Mellon Corp., Chief Financial Officer

As we look forward, we’re clearly in an environment of uncertainty here. We’re also in an environment with rising interest rates, which benefit banks with increased loan demand, which benefit banks. And in PNC’s case, a business – or a bank that never changed its credit box when credit terms got really easy, a business that has a very – or a bank that has a very solid mix of fee-based businesses, and importantly, a bank that has substantially expanded its geographic presence.

  • William Stanton Demchak – The PNC Financial Services Group, Inc., Chairman, President & Chief Executive Officer

As we see the start of another rate tightening cycle, first quarter NII increased 9% year-on-year, primarily driven by growth in our investment portfolio coupled with higher loan balances, which will also benefit us in future quarters.

Relative to the fourth quarter, NII was up 5%, which came in better than expected due to higher long-end rates. The sequential increase was largely driven by the improvement in both short and long-end rates, which benefited our yields together with higher investment portfolio balances.

  • Eric W. Aboaf – State Street Corp., Executive Vice President & Chief Financial Officer

Banking executives provide their thoughts this quarter on the strength of the economy considering ongoing market volatility triggered by various factors and the potential for a recession and how they plan to strategically minimize the toll on their respective organizations and client portfolio

This quarter our resilience was tested, and once again, we maintained a focus on what we can control and grew responsibly and earned our way through the turmoil. So we talked to you during the quarter. Many of you expressed questions about the impact of the macro environment and changes in our company. The lingering impact of the pandemic on supply chains and business opportunities, inflation and Fed reduction of monetary accommodation, the impacts of the Russian-Ukraine war both on a first-order effect and second-order effects. we do remain mindful of all of these. So could a slowdown of the economy happen? Perhaps. But right now, the size of the economy is bigger than pre-pandemic levels, consumer spending remains strong, unemployment is low and wages are rising.

  • Brian T. Moynihan – Bank of America Corp., Chairman & Chief Executive Officer

So to wrap up, once again this quarter, the company’s performance was strong in a particularly volatile and challenging environment. We helped our clients navigate very difficult markets, provided support to relief efforts and implemented economic sanctions of unprecedented complexity with multiple directives from governments around the world. And, of course, our thoughts remain with everyone, including our employees, affected by Russia’s invasion of Ukraine. Looking ahead, the US economy remains robust, but we’re watching high inflation, the reversal of QE and rising rates as well as the ongoing effects of the war on the global economy.

  • Jeremy Barnum – JPMorgan Chase & Co., Chief Financial Officer

More broadly, the Russian invasion has further complicated the geopolitical landscape and created an additional level of uncertainty that I expect will outlast the war itself. While it is encouraging to see newfound unity among the western democracies, the trend towards deglobalization is clearly gaining momentum. The consequences of that shift are likely to be significant and long-lasting, and I believe it will take some time to fully appreciate all the second- and third-order ramifications.

Beyond geopolitics, I’m keeping a close eye on several other trends. While US unemployment levels are low and wages are increasing, inflation is the highest it’s been in decades. We’re seeing new stress on supply chains and commodity prices and US households are facing rising gas prices as well as higher prices for food and housing. We’re also seeing an increased risk of stagflation and mixed signals on consumer confidence.

These cross-currents will certainly create ongoing complexity in the economic outlook, but whatever the future holds, I believe Goldman Sachs is well-positioned. We continue to make progress on our growth strategy and our commitments to clients is strong – our commitment to clients is stronger than ever.

  • David Michael Solomon – The Goldman Sachs Group, Inc., Chairman & Chief Executive Officer

We constantly work to provide our clients with that type of insight, but close connectivity becomes even more important during periods of market volatility and uncertainty. Over the last two months, following Russia’s invasion of Ukraine, BlackRock held over 200 client engagements and hosted Market Update calls attended by more than 4,600 clients.

I also recently visited clients in Japan, in the Middle East, and here in the United States, many of whom are trying to understand how geopolitical and macroeconomic shifts might impact their investment outcomes. I remember the same heightened level of connectivity with our clients during the initial weeks of the pandemic in spring 2020.

I believe our relationships with clients have never been stronger. Our clients appreciate our voice and our consistent advocacy for long-term investing on their behalf. Our first quarter’s result demonstrates these strengths.

  • Laurence Douglas Fink – BlackRock, Inc., Chairman & Chief Executive Officer

We’ve been on the front foot since the potential for war first emerged, and we intend to remain so. The Russian invasion of Ukraine and the sanctions it triggered unleashed an enormous supply shock on the world, further fueling inflation and placing global growth under considerable pressure. Back recently from seeing clients in Europe and the Middle East, it is security, yet energy, food, defense, cyber or operational resilience that has risen to the top of their strategic dialog. The macro outlook for the rest of the year can only be described as complex and uncertain. And while my job is to prepare for all outcomes, our view is that strong nominal income growth and continuing momentum in the labor market will help support near-term growth in the US economy in the face of inflationary pressures.

But we expect material regional differences in the impact with economic growth in the individual consumer and businesses in Europe hit hardest. With central banks responding to inflation, we’re entering a period of higher rates and a flatter US yield curve. Energy and commodities are at the center of the storm globally, but we don’t believe we’re at the start of a new long supercycle, and we do expect prices to fall to more normal levels.

  • Jane Nind Fraser – Citigroup, Inc., Chief Executive Officer & Director

Earnings Q&A Analysis

The data referenced below is based on Q4’s proprietary analysis performed on the Earnings Call Q&A sessions of S&P 500 organizations within the Asset Managers & Diversified Bank sector (JPM, USB, PNC, C, BAC), that reported earnings over the last few weeks. The charts below highlights the key topics that analyst queries focused on in these calls, displayed as a % of all questions asked.

As per the chart above, Buyback Potential was the key trending topic being addressed by companies in the “Asset Managers & Diversified Bank” sector, covering 5% of all questions asked. Conversations around CET1 came in 2nd place with about 4% of questions focused around that topic, while Deposit Betas, Payments and NII Growth were the 3rd most frequently mentioned topics by analysts, covering 9% (cumulative) of all questions asked.


Thanks for reading this issue of the Earnings Recap blog for the Q1’22 Earnings season. Stay tuned for our trending topics recap next week!

Reference – in case you’re interested, please feel free to review the prior versions of this blog from Q4’21:

Week of February 7th
Week of January 31st
Week of January 24th
Week of January 17th
Week of January 10th

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