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J.P.Morgan, Wells Fargo and Citigroup kick off earnings season

J.P. Morgan, Wells Fargo, and Citigroup kicked off the earnings season, Adyen launched “Tap to Pay” for Android devices, and Payoneer announced laying off 9% of its staff

July 17, 2023

Hi!

Hope you had a great weekend as we are heading into a busy week! J.P. Morgan, Wells Fargo, and Citigroup kicked off the second-quarter earnings seasons on Friday. This week we will hear from the rest of the big banks, as well as credit card issuers American Express, Capital One, and Discover.

In the meantime, let’s review a few stories from the previous week:

  • J.P. Morgan, Wells Fargo, and Citigroup kicked off the earnings season,

  • Adyen launched “Tap to Pay” for Android devices, and

  • Payoneer announced laying off 9% of its staff

Thank you for reading and have a great day!

Jevgenijs

p.s. have feedback? DM me on Twitter

J.P. Morgan, Wells Fargo, and Citigroup Kick Off Earnings Season

U.S. banks, including JPMorgan Chase, Wells Fargo, and Citigroup, kicked off the second-quarter earnings season on Friday by beating earnings estimates and praising a resilient economy. Aided by the acquisition of First Republic Bank, J.P. Morgan reported a 67% YoY increase in net income, with the return on common tangible equity surging to 25%. Wells Fargo reported a 57% YoY increase in net income and a return on common tangible equity of 13%. The banks benefited from higher interest rates and robust consumer spending and borrowing, defying the concerns about a slowing economy.

Executives from the banks expressed confidence in the strength of the economy, particularly regarding U.S. consumers. However, they also acknowledged significant uncertainty about the future. JPMorgan CEO Jamie Dimon stated that he is unsure whether there will be a soft landing, a mild recession, or a hard recession. Although loan defaults increased slightly, they are still at historically low levels. The big banks have reserved funds for potential future defaults, primarily in commercial real estate, but the amounts set aside were not as substantial as during previous economic downturns.

Adyen Launches Tap to Pay for Android Devices

European payments giant Adyen (AMS: ADYEN) is expanding its in-person payment solutions with the launch of “Tap to Pay” on Android. This software-based solution enables businesses to use compatible Android devices, such as smartphones, tablets, kiosks, and handheld devices, as payment terminals, accepting contactless payments and reducing checkout friction. The service will initially be available in the US and Singapore. Adyen launched the “Tap to Pay” product for iOS devices in the summer of 2022.

Image source: Adyen

The company also partnered with Oracle Food and Beverage to integrate the solution into point-of-sale systems commonly used in the hospitality industry. Oracle, a renowned provider of such systems worldwide, serves customers in 180 countries and processes over $150 billion USD in transactions annually. Through this collaboration, Oracle will incorporate Adyen's “Tap to Pay” solution into its Oracle Payment Cloud Service aiming to provide an intuitive checkout process and reduce hardware requirements for businesses in the food and beverage industry.

Payoneer Lays Off 9% of Its Staff

The cross-border payments company Payoneer (NASDAQ: PAYO) plans to reduce its total staff by 9%, according to the filing with the SEC. The company, which currently employs 2,000 people globally, expects to complete the layoffs by the end of the third quarter. The reduction in the workforce is aimed at “enhancing productivity and efficiency” while aligning the company's operations with its growth objectives. Payoneer anticipates charges of approximately $5 million in the third quarter for severance payments and payroll taxes but expects an annualized benefit of about $20 million in operating expenses.

Payoneer plans to reinvest the savings into future growth initiatives and continues hiring for essential roles in research and development. In the first quarter of 2023, the company reached GAAP profitability reporting a Net Income of $7.9 million on total revenue of $192 million. Revenue increased by 40% compared to the first quarter of the previous year driven by higher interest income from customer funds held on the platform. Payoneer raised its full-year 2023 guidance to $810-820 million in revenue and $140-150 million in Adjusted EBITDA, as well as announced the plan to repurchase up to $80 million of its outstanding common stock.

The stock performance of Visa (NYSE: V), Mastercard (NYSE: MA), American Express (NYSE: AXP), Capital One (NYSE: COF), Discover (NYSE: DFS), and Synchrony (NYSE: SYF) suggests that investors are not buying the recession story. As can be seen from the chart below, the stocks of these companies have been on a rally since early May. A recession would undermine the fundamentals of these businesses through lower consumer spending and higher default rates.

Cover image source: J.P.Morgan

Disclaimer: Information contained in this newsletter is intended for educational and informational purposes only and should not be considered financial advice. You should do your own research or seek professional advice before making any investment decisions.