Bank Stock Roundup: Q3 Earnings Starts With A Bang; JPMorgan, Citi, Wells Fargo, BofA All Beat Estimates

Q3 earnings took precedence, with all eyes turning to the banks’ performance over the last five trading days. Most of the banks that reported this week managed to beat estimates with their top-line strength and cost-control measures. This was reflected in the bullish price trends of the banking stocks.

The quarterly performance reflected resilience, with improved loans and deposits, and efficient cost-control measures. Further, trading volumes improved, while mortgage lending showed strength.

Moreover, rebound in oil prices significantly eased pressure from energy sector loans. This, in turn, helped banks to lower credit cost. Absence of substantial legal costs also supported the banking financials.

However, the persistent low-rate environment continued to adversely impact net interest margins for most of the banks. Apart from this, several global growth concerns affected the results to some extent.

Nonetheless, upbeat performance of banks reported so far, have raised optimism among investors.

(Read: Bank Stock Roundup for the week ending Oct 14, 2016)

Important Earnings of the Week

1. Driven by improved trading and mortgage banking revenues, JPMorgan Chase & Co.’s (NYSE:JPM) third-quarter 2016 earnings handily surpassed the Zacks Consensus Estimate. Improved fixed income and equity trading revenues, higher mortgage banking fees and growth in investment banking income drove the results. Further, higher net interest income, perhaps attributable to the rise in loan supported top line.

Additionally, a decent decrease in operating expenses, a legal benefit and net reserve releases in the Oil & Gas portfolio aided the bottom-line growth. However, higher-than-expected rise in provisions (largely driven by growth in the Card portfolio) hurt results marginally in the quarter. (Read more: JPMorgan Q3 Earnings Easily Top on Solid Trading & Lending)

2. Driven by decline in operating expenses, Wall Street banking giant, Citigroup Inc. (NYSE:C) delivered a positive earnings surprise of nearly 8% in third-quarter 2016. However, earnings compared unfavorably with the year-ago figure. Though profitability was hit by decline in overall revenues, the company recorded higher fixed income markets revenues, supported by an improved trading environment. Also, investment banking revenues improved owing to increased industry-wide debt underwriting activity during the reported quarter. (Read more: Citigroup Tops Q3 Earnings, Trading Revenues Improve)

3. Supported by a strong top-line growth, Wells Fargo & Company’s (NYSE:WFC) third-quarter 2016 recorded a positive earnings surprise of about 1%. The company witnessed organic growth in revenues. Moreover, a strong capital position acted as a tailwind. However, higher provisions and expenses were the dampeners. (Read more: Wells Fargo Tops Q3 Earnings, Costs & Provisions Up)

4. Rise in fixed income sales and trading revenues as well as mortgage banking fees drove Bank of America Corp (NYSE:BAC).’s (NYSE:C) third-quarter 2016 earnings, which easily surpassed the Zacks Consensus Estimate. Impressive growth in fixed income trading revenues and investment banking fees, along with higher mortgage banking income supported revenue growth. However, weakness in equity trading revenues marginally offset these positives.

Though credit costs witnessed a rise, energy sector concerns seem to be over. Further, the absence of legal costs and efficient expense management were sufficient to support the bottom line. (Read more: BofA Beats on Q3 Earnings as Bond Trading Improves)

5. The PNC Financial Services Group, Inc.’s (NYSE:PNC) third-quarter 2016 earnings handily beat the Zacks Consensus Estimate. Better-than-expected results were aided by increased net interest income as well as non-interest income. Also, continued growth in loans and deposits were among other positives. However, on the downside, the quarter recorded higher expenses and provisions. (Read more: PNC Financial Tops Q3 Earnings, Expenses High)

6. Driven by solid growth in mortgage banking revenues, U.S. Bancorp’s (NYSE:USB) third-quarter 2016 earnings per share increased 3.7% year over year. Results reflected higher revenues, generated on the back of growth in net interest income (NII) as well as non-interest income. However, on the down side, the quarter witnessed higher expenses and provisions. (Read more: U.S. Bancorp Q3 Earnings Rise on Mortgage Strength)

Price Performance

Here is how the seven major stocks performed:

In the last five trading sessions, shares of PNC Financial and Capital One Financial Corp. (NYSE:C) increased 6% and 4.2%, respectively. Further, BofA rose 3.5%.

Over the last six months, BofA and JPMorgan were the best performers, with their shares surging 11.1% and 7.3%, respectively. However, Wells Fargo declined 10.2% over the same time frame.

What's Next in the Banking Space?

Over the next five trading days, the Q3 earnings for banking stocks will continue in full swing. Among the major banks, Capital One and KeyCorp. (NYSE:KEY) are set to report their quarterly numbers on Oct 25. The performance of bank stocks will likely be in sync with their Q3 results.

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