5 Major Bank Stocks Likely To Trump Q1 Earnings Estimates

The Q1 earnings season is knocking at the door and investors seem keen to know how banks (one of the industries that have been under the spotlight in Q1) are going to perform this time. While the year begun on an optimistic note with President Donald Trump’s policy goals and improving rate scenario, the shine gradually faded by the time the first quarter ended.

Notably, major banks are expected to witness just 0.2% year over year rise in earnings in the quarter. This is significantly below the 12.5% growth witnessed in the prior quarter.

(For detailed look at the earnings outlook for this industry and others, please read our Earnings Preview).

What could be the reasons for the dismal expectations despite an improving operating backdrop for banks? Per the Federal Reserve’s latest data, loan growth slowed down during the quarter. Alternative cheaper ways to borrow and uncertainty over policy changes were perhaps the reason for the decline in loan demand.

Also, a rise in provision for credit losses, mainly owing to increase in credit card debt, is likely to have an adverse impact on the banks’ financials. Further while a rise in prime lending rates for all major banks due to the Fed’s recent rate hikes should ease some pressure on net interest margin, negligible loan growth is likely to partly offset the benefit.

On the other hand, overall non-interest income should witness an improvement. Trading revenues are anticipated to increase, driven by the strength in equity as well as fixed income and currencies. Ambiguity related to Trump's policy changes is expected to lead to better trading activities.

Further, per the Thomson Reuters data, M&A activity remains robust as the total deal value of announced M&As across the world improved during the quarter. Moreover, debt and equity underwriting fees should record an improvement.

On the expense front, banks are continuously looking for cost-saving prospects to strengthen its bottom-line performance. This quarter as well, is expected to record a decline in operating expenses. Additionally, absence of considerable legal expenses will be another major positive for the first-quarter results.

Choosing the Winners

Upcoming results from some of the banks are expected to reflect resilience. Therefore, this is the right time for you to select some banking stocks that are well poised to beat earnings in their upcoming releases.

Choosing the most rewarding stocks within the industry might be a difficult task unless one knows the process to shortlist. One way to do it is by picking stocks that have the combination of a favorable Zacks Rank – Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) – and a positive Earnings ESP.

Earnings ESP is our proprietary methodology for identifying stocks that have high chances of surprising in their upcoming earnings announcement. It shows the percentage of difference between the Most Accurate estimate and the Zacks Consensus Estimate. Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

5 Major Banks Set for Earnings Surprises

Here are five major regional bank stocks that have the right combination of elements to deliver positive earnings surprises in their upcoming announcements:

The PNC Financial Services Group (NYSE:PNC), Inc. (PNC) is slated to release results on Apr 13. The company has an Earnings ESP of +0.55% and it carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for M&T Bank Corporation (NYSE:MTB) (MTB) is +1.04% and it carries a Zacks Rank #3. The company is scheduled to release results on Apr 17.

The Bank of New York Mellon (NYSE:BK) Corporation (BK) has an Earnings ESP of +1.25% and carries a Zacks Rank #3. It is scheduled to report results on Apr 20.

The Earnings ESP for BB&T Corporation (BBT) is +5.71% and it carries a Zacks Rank #3. The company is scheduled to release results on Apr 20.

SunTrust Banks (NYSE:STI), Inc. (STI) has an Earnings ESP of +2.41% and it carries a Zacks Rank #2. The company is slated to release results on Apr 21.

Want to learn more about major banks earnings? Check out our recent video article for additional information: The Hottest Big Bank Earnings Charts.

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