TheChek News Flow

Reports Q2 (Jun) earnings of $1.46 per share, $0.16 better than the Capital IQ Consensus Estimate of $1.30; revenues fell 3.0% year/year to $24.45 bln vs the $23.67 bln consensus. Q2 results included as a significant item $500 million after-tax Firmwide legal expense ($0.13 per share after-tax decrease in earnings; $669 million pretax expense).

Consumer & Community Banking

• Net income was $2.4 billion, a decrease of $646 million, or 21%, compared with the prior year, due to higher provision for credit losses and lower net revenue, partially offset by lower noninterest expense. Net revenue was $11.4 billion, a decrease of $584 million, or 5%, compared with the prior year. Net interest income was $7.0 billion, down $131 million, or 2%, driven by spread compression and lower mortgage warehouse balances, largely offset by higher deposit balances.
• Return on equity was 19% on $51.0 billion of average allocated capital.
• Auto originations were $7.1 billion, up 4% from the prior year and 6% from the prior quarter.
• Mortgage originations were $16.8 billion, down 66% from the prior year and 1% from the prior quarter.
• Consumer & Business Banking net income was $894 million, an increase of $196 million, or 28%, compared with the prior year, predominantly due to higher net revenue. Net revenue was $4.6 billion, up 7% compared with the prior year. Net interest income was $2.8 billion, up 6% compared with the prior year, driven by higher deposit balances, partially offset by deposit spread compression.
• • Deposit margin was 2.23%, compared with 2.31% in the prior year and 2.27% in the prior quarter.
• Mortgage Banking net income was $709 million, a decrease of $433 million from the prior year, driven by lower net revenue and a lower benefit from the provision for credit losses, partially offset by lower noninterest expense. Net revenue was $2.3 billion, a decrease of $772 million compared with the prior year. Net interest income was $1.0 billion, a decrease of $125 million, or 11%, driven by lower warehouse balances as well as lower loan balances due to portfolio runoff.
• • Real Estate Portfolios pretax income was $626 million, down $540 million from the prior year, due to a lower benefit from the provision for credit losses and lower net revenue, partially offset by lower expense. Net revenue was $779 million, a decrease of $129 million, or 14%, from the prior year. This decrease was largely due to lower net interest income resulting from lower loan balances due to portfolio runoff.
• Card, Merchant Services & Auto net income was $840 million, a decrease of $409 million, or 33%, compared with the prior year, driven by higher provision for credit losses, higher noninterest expense and lower net revenue. Net revenue was $4.6 billion, down $117 million, or 3%, compared with the prior year. Net interest income was $3.2 billion, down $162 million compared with the prior year, driven by spread compression....

Corporate & Investment Bank

• Net income was $2.0 billion, down 31% compared with $2.8 billion in the prior year. These results primarily reflected lower revenue, as well as higher noninterest expense. Net revenue was $9.0 billion compared with $9.9 billion in the prior year. Excluding the impact of a DVA gain of $355 million in the prior year, net revenue was down 6% from $9.5 billion, and net income was down 25% from $2.6 billion.
• Banking revenue was $3.1 billion, down 2% from the prior year.
• Investment banking fees were $1.8 billion, up 3% from the prior year. The increase was driven by higher advisory fees of $397 million, up 31% from the prior year on strong wallet share of completed transactions, as well as higher equity underwriting fees of $477 million, up 4% from the prior year. These were partially offset by lower debt underwriting fees of $899 million, down 6% from a strong prior year.
• Treasury Services revenue was $1.0 billion, down 4% compared with the prior year driven by lower trade finance revenue as well as the impact of business simplification initiatives.
• Lending revenue was $297 million, down from $373 million in the prior year primarily due to lower net interest income.
• Markets & Investor Services revenue was $5.9 billion, down 12% from the prior year.
• Fixed Income Markets revenue of $3.5 billion was down 15% from the prior year on historically low levels of volatility and lower client activity across products.
• • Equity Markets revenue of $1.2 billion was down 10% compared with the prior year, primarily on lower derivatives revenue.
  • Securities Services revenue was $1.1 billion, up 5% from the prior year primarily driven by higher net interest income on increased deposits.
  • Return on equity was 13% on $61.0 billion of average allocated capital....

Other metrics of note:

• Fortress balance sheet maintained Common Equity Tier of $161 billion, or ratio of 9.8%; Supplementary Leverage Ratio ("SLR") of 5.4%.
• Tangible Book Value $43.17 compared to A.73 in Q1;Book Value $55.53 compared to $54.05 in Q1.
• Return on tangible common equity (consolidated) 14% compared to 13% in Q1 and 17% in prior year.
• Core loans up 8% compared.
• Avg VaR at $55 mln compared to $42 mln in Q1 with the prior year.