The four biggest US banks extended a string of earnings reports that have exceeded grim expectations for the sector this year with third-quarter results that beat earnings-per-share forecasts across the board.

Three posted sequential expansion in net interest margins (NIMs) for the period, with all also coming in ahead of analyst forecasts on the measure, according to data from S&P Global Market Intelligence. All four also raised their net interest income guidance for the year.

The group also beat consensus estimates for credit provision expenses, with JPMorgan Chase & Co. and Wells Fargo & Co. posting substantial sequential declines. Citigroup Inc. said its credit card losses will likely tick above pre-pandemic levels in 2024, but that the cycle is unfolding as expected.

Over-earning

JPMorgan Chase led the group with 13 basis points of sequential margin expansion to 2.74%, and it once again lifted its net interest income forecast for the year to $89 billion, excluding its markets business, up from an initial projection of $73 billion.

It also continued to guide that the current level of net interest income is unsustainable, and that eventually competition would further push its deposit costs upward. However, it also lifted its guidance for "normalized" annual net interest income from the mid-$70 billion range previously to closer to about $80 billion, incorporating its acquisition of First Republic Bank.

Bank of America Corp.'s NIM increased 6 basis points to 2.12%. The measure has been weighed down by a buildup in the bank's holdings of low-yielding, held-to-maturity securities during the pandemic — the size of the portfolio was $603.37 billion at Sept. 30, down from a peak of $683.24 billion in the third quarter of 2021, and contained unrealized losses of $131.60 billion.

Nevertheless, the bank exceeded its guidance for net interest income during the third quarter, and projected growth in the second half of 2024 after holding about flat with an anticipated trough in the fourth quarter this year.

No alarm over credit

Recent delinquency trends do point to continued increases in net charge-offs for credit cards, typically a major driver of credit cycles overall.

However, there was a hopeful sign from the first banks to report third-quarter results in early stage delinquency trends, according to Piper Sandler analyst Kevin Barker. Early stage delinquencies represent the pool from which most charge-offs ultimately emerge.

At JPMorgan Chase, Citi and Wells Fargo, there was a modest sequential slowdown in year-over-year increases in 30-day delinquencies, according to data he compiled in an Oct. 13 note.

That "marked the first turning point in card credit performance," he said. "It appears tighter underwriting standards are starting to show through."