Analysts at Sterne Agee say the financial industry is seeing a major slowdown in year over year growth right now when compared to the last several quarters. As a result, in a note dated April 8, 2013, analysts Todd Hagerman and Robert Green have slashed their EPS estimates for many of the world’s largest banks and financial firms.
Why the cuts?
The Sterne Agee team notes that over the last several quarters, we’ve seen growth of between 15% and 20%. However, they expect growth to decline by between 3% and 5% year over year for the first quarter. On average, they have reduced their 2014 and 2015 estimates by between 4% and 5%.
They state that the main drivers for these reductions are major mortgage banking declines, very weak capital markets and higher costs for legal expenses and compliance. They don’t believe that the headwinds of legal and regulatory risk which have plagued the financial industry for some time will cease anytime soon.
Yost Partners was up 0.8% for the first quarter, while the Yost Focused Long Funds lost 5% net. The firm's benchmark, the MSCI World Index, declined by 5.2%. The funds' returns outperformed their benchmark due to their tilt toward value, high exposures to energy and financials and a bias toward quality. In his first-quarter letter Read More
Bank of America leads the large-cap cuts
Among their cuts, they highlight Bank of America Corp (NYSE:BAC), CVB Financial Corp. (NASDAQ:CVBF), Citigroup Inc (NYSE:C), First Horizon National Corporation (NYSE:FHN), JPMorgan Chase & Co. (NYSE:JPM), M&T Bank Corporation (NYSE:MTB), PacWest Bancorp (NASDAQ:PACW) and U.S. Bancorp (NYSE:USB). Overall, they adjusted their first quarter earnings per share estimates downward by about 4%. Specifically for the first quarter, they cite “lackluster market sensitive revenues,” higher expenses and “soft spread income.”
Their 2014 estimate for Bank of America Corp (NYSE:BAC) fell from $1.06 a share to 98 cents a share, while their 2015 estimate remains at $1.55 a share. For the first quarter, they dramatically reduced their estimate for the bank from 30 cents to just 2 cents per share. They say this is partially because of the announced $3.7 billion settlement with the New York Attorney General’s office, which they estimate will have an impact of 22 cents per share after taxes.
Other big adjustments among the large-cap stocks include the 2014 estimate for JPMorgan Chase & Co. (NYSE:JPM), which fell from $5.90 to $5.85 a share. Their 2015 estimate for the bank declined from $6.30 to $6.25 a share.
They adjusted their other large-cap regional stocks just modestly. Here’s the full list.