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Bank Stock Roundup: FITB, KEY, CMA Beat on Q2 Earnings, RF, COF Incur Losses

Amid the coronavirus crisis, most banks built huge reserves in second-quarter 2020 as well on anticipations of the pandemic’s crippling impact on the economy. Therefore, most banks’ bottom lines were affected during this period on rise in provisions to safeguard the anticipated losses in the coming quarters.

Additionally, low interest rates and soft loan demand (except for commercial and industrial) resulted in a decline in net interest income and contraction of banks’ net interest margins.

On the fee income front, major banks managed to get some relief on higher trading revenues, resulting from solid client activities and an upsurge in market volatility. Further, a decent investment banking performance, aided by strong underwriting business, was on the upside. Also, historically low mortgage rates supported banks’ mortgage banking business as refinancing activities witnessed a surge. Nonetheless, consumer banking operations played spoilsport due to the declining consumer sentiment.

On the cost front, overall expense levels were manageable.

Overall, banks’ balance sheet and liquidity positions remained solid amid an economic slowdown.



(Read: Bank Stock Roundup for the Week Ending Jul 17, 2020)

Important Earnings of the Week

1. Capital One’s COF second-quarter 2020 adjusted loss of $1.61 per share was wider than the Zacks Consensus Estimate of a loss of $1.25. The year-ago quarterly earnings were $3.37 per share. The results reflect a drastic surge in provisions amid the coronavirus-related uncertainty. Also, a decline in loan balance, lower interest rates and weak consumer activity were headwinds. However, improvement in the deposit balance and robust capital ratios offered some support.

2. KeyCorp’s KEY second-quarter earnings of 16 cents per share surpassed the Zacks Consensus Estimate by a penny. However, the figure compared unfavorably with the 40 cents earned in the prior-year quarter. The results benefited from a rise in revenues, slight decline in operating expenses, and higher loan and deposit balances. Nevertheless, lower rates and significantly higher provisionsns were the undermining factors.

3. Comerica CMA delivered earnings per share of 80 cents, significantly surpassing the Zacks Consensus Estimate of 21 cents during the June-end quarter. Earnings, however, came in lower than the prior-year quarter figure of $1.94. Lower revenues were recorded on reduction in net interest as well as non-interest income. Moreover, rise in expenses and provisions were major drags. Nevertheless, rise in loans and deposits acted as tailwinds.

4. Regions Financial RF reported second-quarter 2020 adjusted loss of 23 cents per share, as against the earnings of 39 cents per share recorded in the prior-year period. The Zacks Consensus Estimate was pegged at 7 cents. Results were negatively impacted by higher provisions for credit losses on increasing economic uncertainty due to coronavirus woes. Moreover, rise in expenses is a major drag. However, higher revenues aided by rising loans and deposit balances provided some respite. Notably, mortgage income and capital markets income was on the upswing.

5. Fifth Third Bancorp FITB came up with second-quarter 2020 adjusted earnings of 30 cents per share, surpassing the Zacks Consensus Estimate of 26 cents. However, results compared unfavorably with the prior-year quarter’s earnings of 71 cents per share. The company’s performance displays a strong capital position, with escalating loans and deposits. Also, lower expenses came as a tailwind. However, the results were largely affected by higher provisions due to the coronavirus pandemic. Also, a decline in revenues was an undermining factor.

6. Bank OZK’s OZK second-quarter earnings per share of 39 cents surpassed the Zacks Consensus Estimate of 35 cents. However, the bottom line reflects a decline of 54.7% from the prior-year quarter’s reported number. In the reported quarter, the company recorded a decline in revenues along with higher expenses. Moreover, a significant increase in provision for credit losses hurt performance to some extent. Nevertheless, the balance-sheet position remained strong. Loans and deposits witnessed an increase in the quarter.

Price Performance

Here is how the seven major stocks performed:
 

Company

Last Week

6 months

JPM

0.8%

-26.0%

BAC

5.7%

-27.1%

WFC

5.6%

-43.6%

C

3.7%

-33.6%

COF

5.5%

-37.7%

USB

2.1%

-31.4%

PNC

4.2%

-28.1%



Over the past five trading days, Bank of America BAC and Wells Fargo WFC have recorded the maximum gains, with their shares appreciating 5.7% and 5.6%, respectively. Also, shares of Capital One Financial have rallied 5.5% in the same period.

In the past six months, shares of Wells Fargo, Capital One and Citigroup have depreciated 43.6%, 37.7% and 33.6%, respectively.

What’s Next?

Over the next five trading days, bank earnings will continue in full force. TCF Financial Corporation TCF and Bank of Hawaii Corporation BOH are slated to release quarterly numbers on Jul 27, while UMB Financial Corporation UMBF is scheduled to announce on Jul 28. Prosperity Bancshares, Inc. PB, New York Community Bancorp, Inc. NYCB and BankUnited, Inc. will release quarterly figures on Jul 29, while Hilltop Holdings Inc. HTH is scheduled to report on Jul 30.

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Click to get this free report

Regions Financial Corporation (RF): Free Stock Analysis Report

Comerica Incorporated (CMA): Free Stock Analysis Report

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

Fifth Third Bancorp (FITB): Free Stock Analysis Report

Capital One Financial Corporation (COF): Free Stock Analysis Report

Wells Fargo Company (WFC): Free Stock Analysis Report

KeyCorp (KEY): Free Stock Analysis Report

UMB Financial Corporation (UMBF): Free Stock Analysis Report

Bank of Hawaii Corporation (BOH): Free Stock Analysis Report

TCF Financial Corporation (TCF): Free Stock Analysis Report

Bank OZK (OZK): Free Stock Analysis Report

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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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