JPMorgan Chase & Co. (JPM) and Citigroup Inc (C) Have Outperformed

The company’s revenue growth was primarily driven by 25% year-over-year growth in its securities & banking segment. The securities & banking segment involves investment banking, underwriting, investment research, market making, asset management, and other corporate services. The company’s growth in its investment banking/asset management helped to offset the lack of revenue growth in its consumer lending.

The company reported adjusted net income of $1.25 per share. Analysts on a consensus basis were expecting earnings of around a $1.17 in earnings. The company narrowly beat earnings estimates by 6.8% in the second quarter.

How to position

The good news is that the financial sector was able to offset market volatility with growth in asset management and investment banking services. It seems that the universal banks (JPMorgan Chase & Co. (NYSE:JPM) and Citigroup Inc (NYSE:C)) are the best positioned. Over the short-term, the universal banks are able to offset interest rate related risk through underwriting activity and management fees. Over the long-term, the universal banks are able to collect revenue from mortgage lending activities that are likely to pick up based on the improving economic environment. The Federal Reserve is willing to keep accommodative monetary policy until unemployment reaches 6.5% and CPI inflation reaches above 2%.

The banks can generate significant net income growth through process-driven improvement that will reduce overhead costs. Overall, the universal banks seem well positioned and will be favorably impacted by both better cost management, and improving macro indicators.

Conclusion

Investors would be well-positioned by owning JPMorgan and Citigroup Inc (NYSE:C). The two banks have been able to grow earnings despite bond market volatility. The likelihood of sustained growth is very real as the economy will sustain recovery. The financial sector is one of the best cyclical bets for investors.

The article JPMorgan Chase and Citigroup Have Outperformed originally appeared on Fool.com and is written by Alexander Cho.

Alexander Cho has no position in any stocks mentioned. The Motley Fool owns shares of Citigroup Inc (NYSE:C) and JPMorgan Chase & Co (NYSE:JPM). Alexander is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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