JPMorgan, Wells Fargo, CitiGroup, Bank of America, Morgan Stanley, Goldman Sachs – Earnings Preview via Estimize

JPMorgan
JPMorgan

America’s biggest banks are set to report fourth quarter results over the next two weeks and analysts are predicting mostly misfortune this earnings season The volatility that shook the markets in 2015 has carried over into the first few weeks of 2016. Troubles in China, plummeting oil prices and increasing interest rates are expected to bring uncertainty to Wall Street’s titans. JPMorgan Chase, the biggest U.S. Bank in terms of assets, is the first bank to report this season and is expected to set the tone for other banks to follow. Following Chase are retails banks, Citigroup and Wells Fargo, set to report this Friday with additional reports coming from Goldman Sachs, Morgan Stanley and Bank of America early next week. The overall expectations  remain reasonably low thanks to the challenges of low interest rates, weak capital markets, and additional loan loss reserves.

 

JPM data by YCharts

JPMorgan Chase & Co (JPM) | Reports January 14, Before Markets Open

America’s biggest banks are set to report fourth quarter results over the next two weeks and analysts are predicting mostly misfortune this earnings season The volatility that shook the markets in 2015 has carried over into the first few weeks of 2016. Troubles in China, plummeting oil prices and increasing interest rates are expected to bring uncertainty to Wall Street’s titans. JPMorgan Chase, the biggest U.S. Bank in terms of assets, is the first bank to report this season and is expected to set the tone for other banks to follow. Following Chase are retails banks, Citigroup and Wells Fargo, set to report this Friday with additional reports coming from Goldman Sachs, Morgan Stanley and Bank of America early next week. The overall expectations  remain reasonably low thanks to the challenges of low interest rates, weak capital markets, and additional loan loss reserves.

JPM Chart JPMorgan
JPMorgan

JPM data by YCharts

JPMorgan
JPMorgan

JPMorgan Chase & Co (JPM) | Reports January 14, Before Markets OpenChase kicks off earnings season for banks when they report Q4 2015 earnings this Thursday. Despite steadily declining revenue over the course of 2015, the bank has beaten estimates each of the past 3 quarters. The Estimize consensus calls for EPS of $1.36 and revenue of $23.252 billion, slightly higher than the Wall Street consensus. Compared to Q4 2014, this represents a YoY increase in EPS and revenue of 14% and 3%, respectively.

Following the lead of the Federal Reserve, big banks have raised lending rates. Granted the interest rate hike will reflect future growth, revenue growth this past quarter has been fueled by gains in lending and credit quality. That being said, high litigation and legal expenses has eaten into Chase’s revenue. In the aftermath of the financial crisis, big banks, including JPMorgan Chase, have faced ongoing legal issues resulting in multiple billion dollar fines. On the heels of their earnings report, Goldman Sachs downgraded JPM stock to neutral from a buy rating.

Wells Fargo & Company (WFC) | Reports January 15, Before Markets OpenJPMorganOne of the most stable banks, Wells Fargo is scheduled to report Q4 2015 earnings January 15, before the market opens. Despite the hardships in the financial sector, Wells Fargo expects to post increasing revenue while maintaining stable EPS. In fact, the bank has beaten revenue estimates 5 of the 6 quarters and is often viewed as one of the best post crisis banks. The Estimize consensus calls for EPS of $1.04 and revenue of $21.839 billion, both slightly higher than Wall Street’s estimates.  Compared to Q4 2014, this represents a YoY increase in EPS and revenue of 2% and 1%, respectively. Wells Fargo has effectively carved out its niche as a retail mortgage provider amongst other lending services. With the change in interest rates, Wells Fargo can expect future growth in core lending segments. This year, the company experienced an increase in total loans, average deposits and credit card issuances. Analysts expect Wells Fargo to continue their upward trend and recently upgraded the stock to a “buy” rating despite economic turmoil around the world.

Citigroup, Inc. (C) | Reports January 15, Before Markets OpenJPMorganThe financial sector is expected to experience low growth this earnings season, but much of the heavy hitting will be done by Citigroup. After a rough 2014, Citi beat estimates each of the past three quarters with fourth quarter earnings poised to do the same. This quarter, the Estimize consensus calls for EPS of $1.19 and revenue of $18.146 billion, slightly higher than the Wall Street consensus. Like all the other banks, Citigroup expects lending segments to improve next year with the forthcoming interest rate hikes. The bank’s traditional engines of trading revenue, fixed income and currencies have slumped due to high regulatory costs. After years of cost cutting, the banks have decided to expand its business in the equity market. Despite volatility in the stock market, Citi’s emergence in equities presents a rewarding, but also risky, opportunity for investors.

Bank of America Corporation (BAC) | Reports January 19, Before Markets OpenJPMorganLike the rest of retail banks, Bank of America is faced with the challenges of coping with volatile markets. The forthcoming interest rate hike is expected to stabilize net interest margins, but will not reflect earnings until Q1 2016. Its consumer and business banking segment, which contributed a majority of the company’s revenue  is expected to see slight improvement when Bank of America reports Q4 earnings. The Estimize consensus calls for EPS of $0.34 and revenue of $20.808 billion, slightly higher than the Wall Street consensus. While revenue and EPS are expected to see YoY growth, Bank of America has experienced a great deal of inconsistency over the past 8 quarters. Analysts currently believe interest rates will revitalize this bank and have raised expectations to a “hold” rating.

Morgan Stanley  (MS) | Reports January 19, Before Markets OpenJPMorganBesides retail banks, investment banks will also report earnings in the following weeks. During Q3 2015, Morgan Stanley made headlines following it’s abysmal earnings. The bank posted EPS and revenue approximately $0.30 and $1 billion, respectively, short of what the Estimize community called for. This quarter, the Estimize consensus expects Morgan Stanley to rebound and post EPS of $0.52 and revenue of $8.222 billion. Compared to Q4 2014, this would reflect a YoY increase in EPS and revenue of 30% and 6%, respectively. Like other banks, Morgan Stanley’s fixed income segment has struggled amid low interest rates. The investment bank has also announced it would be cutting jobs in their equity trading division in order to cut costs during these tough operating conditions. Adding fuel to the fire, share prices of Morgan Stanley fell 18% over the course of 2015 as analysts vary on whether to buy, sell or hold the plunging stock.

Goldman Sachs  (GS) | Reports January 20, Before Markets OpenJPMorganThe proverbial villain in banking, Goldman Sachs is scheduled to report earnings January 20th, before markets open. After a booming start to 2015, both EPS and revenue have steadily declined quarter over quarter, posting a huge negative surprise for Q3 2015. For this coming quarter, the Estimize community expects earnings to rebound with EPS of $4.66 and revenue of $7.717 billion. Compared to Q3 2014, this represents a 6% increase in EPS and unfortunately zero growth in revenue. As previously stated, fixed income has struggled due to low interest rates and consequently more institutional investors have shifted asset allocations to equities. M&A continued to be one of the strongest performers for Goldman Sach’s followed by equity and debt underwriting. In 2016, growth areas are expected to come from lower risk investments, investment banking and fixed income following interest rate hikes. With a positive outlook coming into 2016, analysts expect share prices to recover and have deemed the stock a “buy”.

There is still time to get your estimates in here!

Photo Credit: Jason Kuffer