Breaking News
Investing Pro 0

Big Bank Earnings Impress In Q1: 5 Great Picks

By Zacks Investment ResearchStock MarketsApr 14, 2019 09:17PM ET
www.investing.com/analysis/big-bank-earnings-impress-in-q1-5-great-picks-200406739
Big Bank Earnings Impress In Q1: 5 Great Picks
By Zacks Investment Research   |  Apr 14, 2019 09:17PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
BAC
+1.13%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
MSFT
-0.54%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
JPM
+1.34%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
FITB
-0.17%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
WFC
+0.68%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
MS
+0.39%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

On Apr 12, big banks kicked off the first-quarter earnings season on a strong note. Results from JPMorgan (NYSE:JPM) , Wells Fargo (NYSE:WFC) and PNC Financial (NYSE:PNC) defied market expectations by a wide margin. The results didn’t just put fears of widespread underperformance to rest but also allayed concerns of a near-term U.S. economic slowdown.

U.S. banks have been facing a number of challenges, which is why investors were apprehensive about earnings numbers. The Fed’s new-found dovishness, a flattening yield curve, a government shutdown and declining trading revenues are major headwinds confronting the sector at present.

Going by early signs, the sector has emerged relatively unscathed, aided in no small part by rising rates and the Trump administration’s tax cuts. With the likes of Bank of America (NYSE:BAC) and Morgan Stanley (NYSE:MS) slated to report this week, it makes sense to pick stocks from the sector which are likely to outperform earnings estimates.

JPM Results Lead Banking Charge

The first major bank to report earnings was JPMorgan, the largest U.S. bank in terms of assets. JPMorgan reported first-quarter 2019 earnings of $2.65 per share, which outpaced the Zacks Consensus Estimate of $2.32. Also, the figure was up 12% from the prior-year quarter. Shares of JPMorgan ended the day 4.7% higher.

Despite the Fed’s recent dovishness, the bank benefited from the series of rate hikes implemented by the central bank last year. This resulted in an 8% increase in net interest income.

Growth in JPMorgan’s credit card business also helped power net revenues, which totaled $29.1 billion, up 4% from the year-ago quarter. (Read: JPMorgan Q1 Earnings Beat on Rates, Debt Underwriting)

PNC, WFC Defy Expectations

PNC Financial also benefited from a step up in lending, both to consumers and businesses. Shares of the bank ended 3.1% higher after reporting first-quarter earnings per share of $2.61, which surpassed the Zacks Consensus Estimate of $2.59.

Meanwhile, Wells Fargo recorded a positive earnings surprise of 11.1% in first-quarter 2019. The earnings beat was primarily attributable to prudent cost management by the bank. However, shares ended 2.6% lower due to a weak profit outlook for 2019.

Rate Hikes, Tax Cuts Boost Bank Profits

It is clear from this early clutch of bank results that the sector benefited substantially from higher interest rates. Fed Chair Jerome Powell adopted a hawkish stance early in his tenure, hiking rates and overseeing a balance sheet reduction exercise. This allowed banks to charge more for credit cards and loans.

Another factor boosting bank earnings was lower taxes. Earlier this month, JPMorgan CEO Jamie Dimon heaped lavish praise on the Trump administration’s tax cuts. Per his annual investor letter, these actions have lifted JPMorgan earnings by $3.7 billion in 2018. According to the Federal Deposit Insurance Corporation, tax reductions lifted bank profits by $28.8 billion in 2018.

Our Choices

Early signs indicate that bank earnings are set to defy expectations on the back of stiffer rates which have helped boost lending margins. Tax cuts have also boosted bank profits significantly this time around. With the majority of banks yet to release their earnings numbers, it makes sense to invest in select banks.

Earnings ESP is our proprietary methodology for identifying stocks that have high chances of surprising with their next earnings announcement. It shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

You could further narrow down the list of choices by looking at stocks that have a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.

Mercantil Bank Holding Corporation (NASDAQ:AMTB) is a bank holding company that operates through its wholly-owned subsidiary bank, Amerant Bank N.A., including its investment and trust services subsidiaries, Amerant Investments Inc. and Amerant Trust N.A.

Powered by the right combination of the two key ingredients — an Earnings ESP of +2.27% and a Zacks Rank of 1 — our proven model shows an earnings beat for Mercantil Bank in the to-be-reported quarter.

The company is expected to report first-quarter 2019 results on Apr 30.

Fifth Third Bancorp (NASDAQ:FITB) has 1,121 full-service banking centers in 10 states throughout the Midwestern and Southeastern regions of the United States.

It has beaten the Zacks Consensus Estimate for earnings in the last four quarters, the average beat being 8.5%.

Backed by the favorable combination of an Earnings ESP of +0.34% and a Zacks Rank of 2, Fifth Third Bancorp is expected beat estimates when it reports first-quarter 2019 results on Apr 23.

First Hawaiian, Inc. (NASDAQ:FHB) is a bank holding company for First Hawaiian Bank.

First Hawaiian has beaten the Zacks Consensus Estimate for earnings in the last four quarters, the average positive surprise being 3.9%.

An Earnings ESP of +0.47% and a Zacks Rank of 2 make us optimistic about an earnings beat for First Hawaiian in the to-be-reported quarter.

The company is likely to report first-quarter 2019 results on Apr 25.

Bank of Marin Bancorp (NASDAQ:BMRC) is a holding company for Bank of Marin.

It has beaten the Zacks Consensus Estimate for earnings in two of the last four quarters, the average positive surprise being 4%.

Powered by the right combination of the two key ingredients — an Earnings ESP of +5.1% and a Zacks Rank of 2 — our proven model shows an earnings beat for Bank of Marin in first-quarter 2019 (results expected on Apr 22).

Veritex Holdings, Inc. (NASDAQ:VBTX) is a bank holding company. The bank operates through its wholly-owned subsidiary, Veritex Community Bank.

An Earnings ESP of +0.58% and a Zacks Rank of 2 raise the chances of an earnings beat for Veritex in first-quarter 2019.

The company is expected to report results on Apr 22.

Biggest Tech Breakthrough in a Generation

Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.

A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft (NASDAQ:MSFT) in the 1990s. Zacks’ just-released special report reveals 7 stocks to watch. The report is only available for a limited time.

See 7 breakthrough stocks now>>



The PNC Financial Services Group, Inc (PNC): Free Stock Analysis Report

JPMorgan Chase & Co. (JPM): Free Stock Analysis Report

Fifth Third Bancorp (FITB): Free Stock Analysis Report

Bank of America Corporation (BAC): Free Stock Analysis Report

Wells Fargo & Company (WFC): Free Stock Analysis Report

First Hawaiian, Inc. (FHB): Free Stock Analysis Report

Bank of Marin Bancorp (BMRC): Free Stock Analysis Report

Morgan Stanley (MS): Free Stock Analysis Report

Mercantil Bank Holding Corporation (AMTB): Free Stock Analysis Report

Veritex Holdings, Inc. (VBTX): Free Stock Analysis Report

Original post

Zacks Investment Research
Big Bank Earnings Impress In Q1: 5 Great Picks
 

Related Articles

Big Bank Earnings Impress In Q1: 5 Great Picks

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email