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Bank Stock Roundup: All About Q3 Earnings; JPMorgan, BofA, Citigroup in Focus

Last five trading days have seen third-quarter earnings releases by major banks. So far, results reflect pressure on revenues across the board. Equity market turmoil during the quarter and a still low interest rate environment were largely responsible for the strain on revenues.

Further, demand for loans remained subdued, while provision for loan losses continued to rise mainly due to lower reserve releases and increased provision for energy sector loans.

Nevertheless, absence of significant legal expenses, coupled with cost-control initiatives (reorganization and streamlining), helped most banks to surpass their respective Zacks Consensus Estimates, which were pretty conservative after a number of downward revisions.

Overall, the earnings beat led to positive share price movement for banking stocks.

(Read the last Bank Stock Roundup for Oct 9, 2015 )

Recap of the Week's Important Earnings:

1. Industry challenges and a strained global environment held back JPMorgan Chase & Co.JPM from beating the Zacks Consensus Estimate in third-quarter 2015, despite the latter being quite conservative after a number of downward revisions lately. The bank came up with adjusted earnings of $1.32 per share, delivering a negative surprise of 4.4%. Weak trading activities primarily led to a decline in the overall profit for JPMorgan this time around (read more: JPMorgan Misses on Q3 Earnings as Weak Trading Hits Hard ).

2. Though Bank of America CorporationBAC comfortably surpassed the Zacks Consensus Estimate, weakness in fixed income trading and lower equity investment income were the undermining factors (similar to JPMorgan). Lower operating expenses and negligible legal costs drove BofA's earnings of 37 cents per share, which outpaced the Zacks Consensus Estimate of 34 cents (read more: BofA Q3 Earnings Up, Costs Plummet; Revenues Slide Y/Y ).

3. Similar to BofA, Citigroup Inc.C delivered a positive earnings surprise of 1.6% in third-quarter 2015, largely driven by lower legal and repositioning costs. The company's adjusted earnings per share of $1.31 outpaced the Zacks Consensus Estimate of $1.29. As expected, pressure on revenues owing to a fall in fixed income market revenues was the major undermining factor. Further, provision for credit losses surged (read more: Citigroup's Cost Plunge Aids Solid Q3 Earnings ).

4. Unlike the above three banks, Wells Fargo & CompanyWFC was able to overcome industry challenges, with its results driven by revenue growth (up 3.3% year over year). The company's earnings of $1.05 per share beat the Zacks Consensus Estimate by a penny. Results benefited from organic growth aided by strong loans and deposit balances. However, higher non-interest expenses and provisions were a concern (read more: Wells Fargo Q3 Earnings Beat Estimates, Revenues Up ).

5. Like almost all major banks, The PNC Financial Services Group, Inc. 's PNC third-quarter results depicted pressure on revenues. Nevertheless, the company's earnings per share of $1.90 easily outpaced the Zacks Consensus Estimate of $1.78, helped by stable operating expenses. Higher provisions, however, remained a concern (read more: PNC Financial Q3 Earnings Rise Despite Lower Revenues ).

6. U.S. BancorpUSB reported third-quarter 2015 results, with its earnings per share of 81 cents meeting the Zacks Consensus Estimate. Growth in average loans and deposits, along with top-line expansion, drove organic growth. Also, reduction in provisions was a positive. Nevertheless, an increase in expenses was on the downside (read more: U.S. Bancorp Reports In-Line Q3 Earnings, Revenues Rise ).

Price Performance

The overall performance of banking stocks depicted a bullish trend. Here is how the seven major stocks performed:

Company Last Week 6 months
JPM -0.1% -2.3%
BAC 3.9% 4.2%
WFC 1.1% -2.6%
C 3.1% -0.3%
COF 0.1% -9.1%
USB -1.4% -4.5%
PNC -2.3% -4.4%

In the last five trading sessions, BofA and Citigroup were top performers, with their shares rising 3.9% and 3.1%, respectively. On the other hand, PNC Financial and U.S. Bancorp fell 2.3% and 1.4%, respectively.

Over the last six months, BofA was the only gainer among the major banks, with its shares surging 4.2%. On the other hand, Capital One Financial Corporation COF , U.S. Bancorp and PNC Financial slumped 9.1%, 4.5% and 4.4%, respectively.

What's Next in the Banking Universe?

Earnings will continue to dominate headlines over the next five trading days. The Bank of New York Mellon Corp. BK , Fifth Third Bancorp FITB and Regions Financial Corp. RF are slated to announce results on Oct 20; while Capital One will report on Oct 22.

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JPMORGAN CHASE (JPM): Free Stock Analysis Report

REGIONS FINL CP (RF): Free Stock Analysis Report

PNC FINL SVC CP (PNC): Free Stock Analysis Report

CAPITAL ONE FIN (COF): Free Stock Analysis Report

US BANCORP (USB): Free Stock Analysis Report

FIFTH THIRD BK (FITB): Free Stock Analysis Report

BANK OF NY MELL (BK): Free Stock Analysis Report

WELLS FARGO-NEW (WFC): Free Stock Analysis Report

CITIGROUP INC (C): Free Stock Analysis Report

BANK OF AMER CP (BAC): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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