Bank Stock Roundup: Q3 Earnings Impress, BofA, PNC Financial Beat Estimates

Most banks that reported third-quarter 2017 results this week managed to record bottom-line improvement on the back of top-line strength and lower provisions. 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, the results mirrored a marginal upswing in loans. Moreover, margin pressure seems to be easing significantly. Further, the rise in deposit balances helped drive organic growth at the 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 Oct 13, 2017)

Important Earnings of the Week

1. Wells Fargo & Company’s (NYSE:WFC) third-quarter 2017 adjusted earnings of $1.04 per share came in line with the Zacks Consensus Estimate. Including previously disclosed mortgage-related discrete litigation accrual of 20 cents per share, earnings came in at 84 cents per share, comparing unfavorably with the prior-year quarter’s earnings of $1.03 per share. Though rise in rates provided some respite, lower revenues aided by a fall in non-interest income were recorded. In addition, expenses soared.

Further, reduction in loans acted as headwind for the quarter. Though the bank’s commercial portfolio improved, consumer loans disappointed. Improvement in credit quality and steady capital deployment activities were experienced. (Read more: Wells Fargo Q3 Earnings in Line, Legal Costs Flare Up)

2. Despite trading slowdown, loan growth and higher interest rates drove Bank of America Corp’s (NYSE:C) third-quarter 2017 earnings of 48 cents per share, which outpaced the Zacks Consensus Estimate of 46 cents. The figure was 17% higher than the prior-year quarter. Impressive net interest income growth, marginal increase in equity trading income and a slight rise in investment banking fees supported revenues. Operating expenses also recorded a decline. Further, credit costs decreased despite rise in loans. (Read more: BofA Keeps the Trend Alive, Beats on Q3 Earnings)

3. U.S. Bancorp’s (NYSE:USB) third-quarter 2017 earnings per share of 88 cents came in line with the Zacks Consensus Estimate. Results came ahead of the prior-year quarter earnings of 84 cents. Easing margin pressure on rising rates was witnessed in the quarter. Moreover, revenues improved on a year-over-year basis aided by rise in net interest income.

Further, elevated average loans and deposits balances were tailwinds. However, escalating expenses, lower mortgage banking revenues and provisions were major drags. (Read more: U.S. Bancorp's Q3 Earnings as Expected, Revenues Up)

4. Riding on higher revenues, The PNC Financial Services Group, Inc. (NYSE:PNC) reported a positive earnings surprise of 1.4% in third-quarter 2017. Earnings per share of $2.16 beat the Zacks Consensus Estimate of $2.13. Moreover, the bottom line reflects a 17.4% increase from the prior-year quarter. Continued growth in loans helped the company earn higher net interest income during the quarter.

Also, non-interest income witnessed a year-over-year growth. However, higher expenses hurt results to some extent. Further, rise in provision for credit losses was a headwind. (Read more: PNC Financial Beats Q3 Earnings Estimates, Costs Up)

5. BB&T Corporation’s (NYSE:BBT) third-quarter 2017 adjusted earnings of 78 cents per share came in line with the Zacks Consensus Estimate. Results recorded 2.6% bottom-line improvement from the year-ago quarter. Results reflected an increase in revenues and higher expenses. The quarter witnessed a decrease in loans, and leases and deposits. Additionally, provision for credit losses decreased, which was a tailwind. (Read more: BB&T Corp Q3 Earnings as Expected, Revenues Rise Y/Y)

6. KeyCorp’s (NYSE:KEY) third-quarter 2017 adjusted earnings of 35 cents per share were in line with the Zacks Consensus Estimate. Also, this compares favorably with 30 cents recorded in the prior-year quarter. Results were supported by revenue synergies from the First Niagara Financial Group acquisition deal (completed in August 2016) and higher interest rates.

Furthermore, lower credit cost, an increase in fee income, and improving loans and deposits were the tailwinds. On the other hand, higher operating expenses were on the downside. (Read more: KeyCorp Q3 Earnings In Line, Revenues & Expenses Rise)

Price Performance

Here is how the seven major stocks performed:

In the last five trading sessions, BofA and Capital One Financial Corp. (NYSE:C) were the major gainers, with the shares increasing 2.9% and 2.5%, respectively. JPMorgan Chase & Co. (NYSE:JPM) moved up 2.3%.

Citigroup Inc. (NYSE:C) and BofA were the best performers over the last six months, with the banks’ shares jumping 23.2% and 17.9%, respectively. Also, shares of PNC Financial and JPMorgan increased 17.5%.

What’s Next?

The focus will solely be on earnings releases next week as well. Zions Bancorporation (NASDAQ:ZION) will be reporting on Oct 23, Regions Financial (NYSE:RF) , Capital One Financial and Fifth Third Bancorp (NASDAQ:FITB) on Oct 24, and Huntington Bancshares (NASDAQ:HBAN) and BOK Financial (NASDAQ:BOKF) on Oct 25.

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