JPMorgan Chase & Co., Wells Fargo & Co: Earnings Preview

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JPMorgan Chase & Co., Wells Fargo & Co: Earnings Preview
By The original uploader was Henry W. Schmitt at English Wikipedia (Transferred from en.wikipedia to Commons.) [Public domain], via Wikimedia Commons

JPMorgan Chase & Co. (NYSE:JPM) and Wells Fargo & Co (NYSE:WFC) are scheduled to announce their earnings on Friday, and are expected to post earnings on the lower side despite the recent gains made by their respective stocks. A sluggish revenue scenario for the banks is expected to weigh on the earnings of both the banks.

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Despite low expectations, JP Morgan as well as Wells Fargo stock traded actively in recent weeks, and were upbeat touching a 52-week high even though the margins were low along with low level loan growth.

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Analysts bullish on JPMorgan

JPMorgan Chase & Co. (NYSE:JPM) is expected to post earnings per share of $1.41, a decline of 11% compared to the first quarter of 2013, according to analyst estimates. Revenue is estimated to come down at $24.6 billion, a decline of 5%.

The JP Morgan investment banking unit will also be in focus in the wake of Michael Cavanagh, the unit’s co-head, and Blythe Masters, the chief of its commodities division stepping down from their positions and leaving the bank.  JP Morgan is in the process of selling off its commodities unit due to a changed federal regulatory scenario, any update on the subject will also be interesting to watch in the upcoming earnings.

Analysts are bullish on JPMorgan with a majority of analysts giving a Buy recommendation. Investors have also been happy with the stock gaining 23% over the last 52 weeks.

Wells Fargo attracting value investors

Another bank, Wells Fargo & Co (NYSE:WFC), is expected to report an EPS of 96 cents, an increase of 4 cents over the previous year period, but the expected $20.6 billion in revenue is a 3% decline from the year-ago period.

Analysts have a mixed opinion on Wells Fargo with majority of them giving a Hold recommendation. The bank reached a new all-time high last week. Apart from the rising share price, the bank rewarded investors with an oversized dividend.

With the slow-but-steady recovery of the economy after the recession, there are speculations that banks may put an end to their cost saving measures. Both JPMorgan Chase & Co. (NYSE:JPM) and Wells Fargo & Co (NYSE:WFC) have been lowering the head count in their mortgage units respectively.

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Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com
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