Expect late-cycle vibes when giant U.S. banks report quarterly earnings
Overall, late-cycle growth trends may be in evidence, as the biggest U.S. banks get set to report first-quarter (Q1) earnings in coming days. Their businesses will continue to enjoy relative stability amid high employment, undemanding credit costs and solid capital ratios across the sector. Yet consensus suggests the median revenue gain should slow to 3% from 4% in Q4. Wall Street also expects median EPS growth to be lower vs. 2018’s 6%, which was boosted by tax cuts.
- Improving loan growth will be a welcome theme. Trouble is, the Treasury yield curve inversions of recent months are a negative omen for net interest margins. As such, the outlook for interest income amid a patient Fed will be a key watch point
- At the same time, trading revenue growth will again be the exception rather than the norm for giant American lenders. The challenging comparable trend of Q1 2018, when markets businesses generally did well, will exacerbate any poor performance in Q1 2019
- Housing data point to a volume squeeze for lenders with large mortgage operations, implicating Wells Fargo, Bank of America and JPMorgan, though the bottleneck is expected to ease in Q2
Wells Fargo & Co Q1 2019 earnings, 12th April, 13.00 BST
Shares in the first big U.S. bank out of the gate this season could extend their meagre rise so far in 2019 if low revenue expectations are met. These could edge down from $21bn in Q4, though EPS could be flattered by another financial reserve release. An update on the lack of a CEO will be just as crucial.
JPMorgan Chase & Co. Q1 2019 earnings, 12th April, before U.S. market open
At $28.35bn, revenues are forecast to narrowly miss the first quarter of 2018’s, though the trading result will once again be a major focus. JPM has already forewarned that its markets business will see a “low-teens” fall. More than that will hurt the shares, less could extend the stock’s 8% rise since last year.
Citigroup Inc. Q1 2019 earnings, 15th April, before U.S. market open
Another trading revenue slump is expected to drag the top line down 1% to $18.59bn. In March, the CEO projected a “high single-digit” drop in trading sales. A modest drop in costs is the bright spot Wall Street is seeking.
Goldman Sachs Group Inc. Q1 2019 earnings, 15th April, before U.S. market open
Goldman is the best-performing large U.S. bank stock in the year to date, rising 21% as investors warm to its push into retail lending. The 10% improvement in revenues against Q4 to almost $9bn won’t hurt, if realised. Since that would be more than 10% lower than Q4 last year though, GS’s honeymoon moment could end swiftly if the top line disappoints.
Bank of America Corp. Q1 2019 earnings, 16th April, 11.45 BST
BofA’s solid net interest margin growth of Q4 could be a tough act to follow. Still, a successful achievement of the 7% lift to 66 cents expected in EPS year-on-year, would keep investor cheers going.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.