Bank Stock Roundup: Q3 Earnings Season Unfolds, JPMorgan, BofA & Citi Top Estimates

Most banks that reported third-quarter 2019 results this week managed to record bottom-line growth on higher fee income, driven by fixed income and equity trading revenues resulting from strong client activities. Further, remarkable investment banking performance, aided by underwriting and advisory business, was on the upside.

In addition, mortgage banking revenues rebounded on lower rates aiding banks’ performance. Further, escalation in loans and deposits acted as tailwinds.

However, net interest margin was disappointing, adversely impacted by the Fed’s recent rate cut. Also, an overall rise in non-interest expenses, due to high spending on technology and personnel, and other market development initiatives, was an undermining factor. Further, provisions soared.

Nevertheless, banks continued with their restructuring and streamlining initiatives. Moreover, legal expenses remained manageable.

(Read: Bank Stock Roundup for the Week Ending Oct 4, 2019)

Important Earnings of the Week

1. Citigroup (NYSE:C) delivered a positive earnings surprise of 1% in third-quarter 2019, backed by improved investment banking performance. Adjusted earnings per share of $1.98 outpaced the Zacks Consensus Estimate of $1.96. Also, earnings climbed 20% year over year. Citigroup displayed revenue strength, riding on consumer banking during the reported quarter. Further, loan and deposit growth was a positive. Also, investment banking revenues jumped on strong advisory business and higher debt underwriting, partly offset by lower equity underwriting fees. (Read more: Citigroup's Q3 Earnings Beat Estimates, Expenses Rise)

2. Improved capital market performance drove Bank of America’s (NYSE:BAC) adjusted third-quarter 2019 earnings of 75 cents per share, which outpaced the Zacks Consensus Estimate of 50 cents. Also, the figure was up 14% from the prior-year quarter. Results excluded merchant services joint-venture impairment charges of $2.1 million. Including this charge, earnings totaled 56 cents per share. Defying market expectations, BofA reported improved trading and investment banking numbers. Trading revenues (excluding DVA) grew 4%, as both equity trading income and fixed income trading revenues witnessed year-over-year improvement. (Read more: BofA's Q3 Earnings Top on Trading, Investment Banking)

3. Better-than-expected underwriting business performance, rise in mortgage banking fees and higher bond trading income drove JPMorgan’s (NYSE:JPM) third-quarter 2019 earnings of $2.68 per share, which outpaced the Zacks Consensus Estimate of $2.44. Rise in wholesale and credit card loans supported net interest income amid the Federal Reserve’s interest rate cuts and decline in consumer loans. Moreover, home lending revenues rose 12% year over year, mainly due to substantially higher mortgage origination volume. (Read more: JPMorgan Q3 Earnings Top on Bond Trading, Underwriting)

4. Wells Fargo’s (NYSE:WFC) third-quarter earnings of 92 cents per share lagged the Zacks Consensus Estimate of $1.15 on lower net interest income. The figure also came in lower than the prior-year quarter earnings of $1.13 per share. Reduced net interest income and rise in expenses were undermining factors. Moreover, provisions soared. However, higher fee income driven by improved trading activities, partly offset by lower mortgage banking revenues was positive. Further, escalation in loans and deposits acted as tailwinds. (Read more: Wells Fargo's Q3 Earnings Disappoint on Lower NII)

5. Driven by top-line strength, U.S. Bancorp (NYSE:USB) recorded a positive earnings surprise of 3.6% in third-quarter 2019. Earnings per share of $1.15 surpassed the Zacks Consensus Estimate of $1.11. Also, the reported figure was up 8.5% from the prior-year quarter. Higher interest and fee income were the driving factors. In addition, loan and deposit growth was recorded. Nonetheless, escalating expenses and provisions were the undermining factors. (Read more: U.S. Bancorp Q3 Earnings Top Estimates on High Revenues)

6. PNC Financial (NYSE:C) reported positive earnings surprise of 5% in the September-end quarter. Earnings per share of $2.94 surpassed the Zacks Consensus Estimate of $2.80. The bottom line also reflected a 4.3% jump from the prior-year quarter’s reported figure. Higher revenues, driven by higher net interest income and escalating fee income, aided the company’s results. Nevertheless, rise in costs and provisions were headwinds. (Read more: PNC Financial Q3 Earnings Top Estimates on High Revenues)

Price Performance

Here is how the seven major stocks performed:

Over the last five trading sessions, BofA and JPMorgan were the major gainers, with their shares increasing 4.7% and 3.6%, respectively. Moreover, shares of PNC Financial rallied 2.4%.

In the past six months, shares of U.S. Bancorp and PNC Financial have jumped 9.6% and 8.3%, respectively. In addition, shares of JPMorgan have escalated 6.9%.

What’s Next?

In the coming week, the focus will solely be on earnings releases. Some banks are scheduled to report third-quarter earnings in the next five trading days. Fifth Third Bancorp (NASDAQ:FITB) and Regions Financial (NYSE:RF) will report on Oct 22, BankUnited, Inc. (NYSE:BKU) and Northern Trust Corporation (NASDAQ:NTRS) on Oct 23, while Huntington Bancshares Incorporated (NASDAQ:HBAN) and Capital One Financial (NYSE:C) will release their quarterly numbers on Oct 24.

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