Bank Stock Roundup: JPM, BofA, WFC & C Impress In Q1 Earnings

Most banks that reported first-quarter 2018 results this week managed to record bottom-line improvement on the back of rising rates, lower taxes and improved trading activities. This also led to positive price movement for most bank stocks over the last five trading days.

In addition to the benefits from higher interest rates, banks’ results mirrored a marginal upswing in loans. Moreover, the results show eased margin pressure.

Importantly, high volatility led to improved trading activities in the quarter, leading to higher trading revenues for banks.

However, mortgage banking business was disappointing. Also, an overall rise in non-interest expenses owing to high spending on technology and personnel, and other market development initiatives was an undermining factor. Nevertheless, legal expenses remained under control.

(Read: Bank Stock Roundup for the week ending Apr 13, 2018)

Important Earnings of the Week

1. Driven by top-line strength, Citigroup (NYSE:C) delivered a positive earnings surprise of 4.3% in first-quarter 2018. Earnings per share of $1.68 for the quarter easily outpaced the Zacks Consensus Estimate of $1.61. Also, earnings compared favorably with the year-ago figure of $1.35 per share. Overall high revenues were reflected, driven by elevated banking, equity markets and consumer banking revenues, along with loan growth. However, fixed income markets revenue disappointed. Moreover, expenses escalated on ongoing investments. (Read more: Citigroup Beats on Q1 Earnings, Records High Revenues)

2. Wells Fargo (NYSE:WFC) recorded positive earnings surprise of 4.7% in the first quarter. Earnings of $1.12 per share surpassed the Zacks Consensus Estimate of $1.07. Moreover, results improved from the prior-year quarter earnings of $1.03. Notably, results are preliminary which might be impacted on resolution of matters with Consumer Financial Protection Bureau (CFPB) and Office of the Comptroller of the Currency (OCC) related to the bank’s compliance risk-management program with a charge of $1 billion in civil money penalties.

Lower provisions and higher interest income aided results. Nonetheless, elevated interest expense and reduced non-interest income, with lower mortgage revenues, were the undermining factors. Additionally, expenses soared. Further, reduction in loans and deposits acted as headwinds for the quarter. (Read more: Wells Fargo Q1 Earnings Beat, Low Provisions Recorded)

3. Amid an expected weakness in investment banking, strong trading results, higher rates and lower tax rate drove JPMorgan’s (NYSE:JPM) first-quarter 2018 earnings of $2.37 per share, which handily outpaced the Zacks Consensus Estimate of $2.28. The reported figure was up 44% from the prior-year quarter. Results in the reported quarter included 11 cents per share of mark-to-market gains related to the adoption of new recognition and measurement accounting guidance for certain equity investments previously held at cost.

Decent loan growth (driven mainly by improved wholesale loans) and higher interest rates aided net interest income growth. Further, higher equity trading income (up 26%) and fixed income trading (up 8%) supported the top line. Additionally, mortgage banking income witnessed a rise, driven by growth in residential mortgage loans, partially offset by fall in mortgage origination volume. (Read more: JPMorgan Q1 Earnings Beat on Better Rates and Trading)

4. Despite dismal investment banking performance, higher interest rates, trading rebound and tax cuts drove Bank of America’s (NYSE:C) first-quarter 2018 earnings of 62 cents per share, which outpaced the Zacks Consensus Estimate of 59 cents. Also, the figure came in 38% higher than the prior-year quarter. Net interest income growth (driven by higher interest rates), higher card income, impressive equity trading income (up 38%) supported revenues. Operating expenses recorded a decline. Additionally, provision for credit losses remains stable. (Read more: BofA Tops Q1 Earnings on Higher Rates, Equity Trading)

5. PNC Financial (NYSE:PNC) reported first-quarter 2018 earnings per share of $2.43 beating the Zacks Consensus Estimate by a penny. Moreover, the bottom line reflected a 24% increase from the prior-year quarter. Continued easing of pressure on net interest margin helped the company earn higher net interest income during the quarter. Though mortgage banking revenues declined, overall non-interest income witnessed year-over-year growth. However, higher expenses hurt results to some extent. Further, the results were partially offset by higher provisions. The company’s net income for the quarter was $1.24 billion, up 15.4% from the prior-year quarter. (Read more: PNC Financial Beats Q1 Earnings Estimates, Revenues Up)

6. U.S. Bancorp’s (NYSE:USB) first-quarter 2018 adjusted earnings per share of 95 cents surpassed the Zacks Consensus Estimate by a penny. The figure came ahead of the prior-year quarter earnings of 82 cents. The company’s top line benefitted from rise in net interest income on the back of easing margin pressure and higher fee income. Further, elevated average loans and deposit balances were tailwinds. However, escalating expenses and lower mortgage banking revenues remained major drags. (Read more: U.S. Bancorp's Q1 Earnings Beat Estimates, Revenues Up)

Price Performance

Here is how the seven major stocks performed:

In the last five trading sessions, Capital One Financial (NYSE:C) was the major gainer, with its shares increasing 2%. Further, shares of JPMorgan, Wells Fargo and BofA inched up 1.3%. Shares of Citigroup, however, declined 1%.

JPMorgan and BofA have been the best performers over the last six months, with their stocks appreciating 15% and 14.4%, respectively. Also, shares of Capital One Financial climbed 13.4%. However, U.S. Bancorp declined 4.3%.

What’s Next?

In the coming week, the focus will solely be on earnings releases. Zions Bancorporation (NASDAQ:ZION) will report results on Apr 23, Capital One Financial, Huntington (NASDAQ:HBAN) and Fifth Third (NASDAQ:FITB) on Apr 24, while BankUnited, Inc. (NYSE:BKU) will report on Apr 25.

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