Bank Stock Roundup: Q4 Earnings Show Improvement; JPM, BAC, WFC, C Beat Estimates

The Q4 earnings season has started off with a bang. Earnings reports from some mega banks in the last four trading days reflect a decent improvement.

Banks reported a rise in trading income as heightened volatility amid the U.S. Presidential elections led to a significant rise in client activity. Also, mortgage banking fees recorded an impressive growth. But investment banking fees have not shown any improvement so far.

Further, the improving economy spurred demand for loans, leading to an increase in interest income. Moreover, as energy sector concerns eased, provision for credit losses witnessed a decline. Also, operating expenses recorded a downward trend on the back of continued cost saving initiatives.

Nonetheless, the reaction of bank stocks has not been in line with the results. This perhaps reflects investors’ discontent with the outlook provided by the banks.

(Read: Bank Stock Roundup for the week ending Dec 23, 2016)

Important Earnings of the Week

1. Driven by impressive trading revenues, JPMorgan Chase & Co.’s JPM fourth-quarter 2016 earnings of $1.71 per share easily surpassed the Zacks Consensus Estimate of $1.42. Also, a modest rise in mortgage banking fees and investment banking income drove the results. Further, higher net interest income, perhaps attributable to the rise in loan, supported the top line. (Read more: JPMorgan Beats Q4 Earnings on Robust Bond Trading).

2. Rise in trading revenues as well as mortgage banking fees drove Bank of America Corporation’s BAC fourth-quarter 2016 earnings of 40 cents per share, which surpassed the Zacks Consensus Estimate of 38 cents. Also, provision for credit losses recorded a fall as the energy sector concerns seem to be over. However, as expected, investment banking fees declined due to lower advisory fees and equity underwriting fees. (Read more: BofA Tops Q4 Earnings as Trading Improves, Costs Dip).

3. Driven by interest income, Wells Fargo & Company’s WFC fourth-quarter 2016 adjusted earnings of $1.03 per share outpaced the Zacks Consensus Estimate by 3 cents. The company witnessed organic growth aided by strong loans and deposit balances, along with elevated interest income. However, higher expenses and lower non-interest income were a concern. (Read more: Wells Fargo's Q4 Earnings Beat, Expenses Flare Up).

4. Citigroup Inc.’s C fourth-quarter 2016 earnings from continuing operations of $1.14 per share outpaced the Zacks Consensus Estimate of $1.12, driven by a decline in operating expenses. Improved trading income and lower cost of credit supported the results. (Read more: Citigroup Tops Q4 Earnings, Trading Revenues Surge).

5. U.S. Bancorp’s USB fourth-quarter 2016 earnings per share of 82 cents came a penny above the Zacks Consensus Estimate. Results were driven by growth in net interest income and non-interest income. However, a rise in expenses and higher credit costs were on the downside. (Read more: U.S. Bancorp Q4 Earnings Beat on Improved Lending).

6. A notable rise in the top line drove BB&T Corporation’s BBT fourth-quarter 2016 adjusted earnings of 73 cents per share. This was in line with the Zacks Consensus Estimate. An improved net interest income and non-interest income as well as stable provisions supported the results. However, higher operating expenses remained a headwind. (Read more: BB&T's Q4 Earnings & Revenues In Line with Estimates).

Price Performance

Here is how the seven major stocks performed:
 

In the last four trading sessions, Citigroup and JPMorgan were the major losers, with their shares falling 5% and 3.9%, respectively. Also, The PNC Financial Services Group, Inc.’s PNC shares declined 2.7%.

BofA and PNC Financial were the best performers in the last six months, with their shares surging 58% and 40.4%, respectively. Moreover, JPMorgan’s shares jumped 30.4%.

What’s Next?

Over the next five trading days, Q4 earnings for banks will continue at full throttle. Among the major banks reporting are Capital One Financial Corporation COF and Fifth Third Bancorp FITB. Both the companies are coming out with their results on Jan 24. Price performance of banking stocks will largely depend on the upcoming results and management guidance.

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JPMorgan Chase & Co. (JPM): Free Stock Analysis Report
 
BB&T Corp. (BBT): Free Stock Analysis Report
 
PNC Financial Services Group Inc. (PNC): Free Stock Analysis Report
 
U.S. Bancorp (USB): Free Stock Analysis Report
 
Fifth Third Bancorp (FITB): Free Stock Analysis Report
 
Wells Fargo & Co. (WFC): Free Stock Analysis Report
 
Citigroup Inc. (C): Free Stock Analysis Report
 
Bank of America Corp. (BAC): Free Stock Analysis Report
 
Capital One Financial Corp. (COF): Free Stock Analysis Report
 
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