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Bank Stock Roundup: JPM, C, BAC Top Q2 Earnings Estimates, WFC Incurs Loss

Amid coronavirus-related concerns, banks persistently built huge reserves in second-quarter 2020 to combat ambiguity surrounding economic recovery. Rising credit costs hampered banks’ bottom-line growth.

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

During the second quarter, fee income turned out to be a major supporting factor. Robust capital markets performance helped banks report record trading and investment banking numbers. Also, historically low mortgage rates supported banks’ mortgage banking business as refinancing activities witnessed a significant surge. Nonetheless, consumer banking operations were an undermining factor owing to declining consumer sentiments.

On the cost front, overall expense levels remained manageable.

Although banks remain uncertain about the future and refrained from providing any near-term guidance, their balance sheet and liquidity positions remained solid amid economic slowdown.

(Read: Bank Stock Roundup for the Week Ending Jun 5, 2020)



Important Earnings of the Week

1. JPMorgan’s JPM second-quarter 2020 earnings of $1.38 per share surpassed the Zacks Consensus Estimate of $1.34. The results were driven by a significant improvement in trading and mortgage banking businesses. Also, investment banking fees witnessed substantial growth, mainly attributable to solid underwriting business. Nevertheless, the bank built a large reserve to tide over economic uncertainty.

2. Citigroup’s C earnings per share of 50 cents for second-quarter 2020 outpaced the Zacks Consensus Estimate of 47 cents. The company also recorded higher revenues on the back of robust investment banking and market performances. However, elevated cost of credit due to the pandemic was a major drag.

3. Bank of America’s BAC second-quarter 2020 earnings of 37 cents per share outpaced the Zacks Consensus Estimate of 28 cents. The results reflected impressive underwriting and trading numbers, partially offset by the impact of a reserve build of $4 billion. Further, lower rates and muted loan demand hurt.

4. Wells Fargo WFC incurred a loss of 66 cents per share in second-quarter 2020, which was attributed to a reserve build of $8.4 billion for the coronavirus outbreak-related crisis. The Zacks Consensus Estimate for the same was pegged at a loss of 7 cents. Reduced net interest income on lower rates and a disappointing fee income impacted the company’s results.

Also, Wells Fargo expects to lower third-quarter cash dividend to 10 cents per share from the prior payout of 51 cents. The decision, which is subject to approval by the board of directors by the end of this month, was taken after the Federal Reserve put a limit on dividend distributions of large banks amid the coronavirus scare.

5. U.S. Bancorp USB reported second-quarter 2020 earnings per share of 41 cents, which surpassed the Zacks Consensus Estimate of 34 cents. Higher loan and deposit balances were tailwinds. Also, fee income surged on higher corporate bond issuance fees and trading revenues. However, a substantial rise in provisions — owing to coronavirus-related concerns — and lower interest rates were headwinds.

6. Truist Financial’s TFC second-quarter 2020 adjusted earnings of 82 cents per share surpassed the Zacks Consensus Estimate of 64 cents. The results reflected an improvement in revenues and a decline in provision for credit losses. However, higher expenses were an undermining factor.

Price Performance

Here is how the seven major stocks performed:

 

 

 

 

 

 

 

 

Over the past five trading days, PNC Financial PNC and Capital One have recorded the maximum rise, with their shares appreciating 4.5% and 4.2%, respectively. However, shares of Bank of America have declined 0.4% in the same period.

In the past six months, shares of Wells Fargo, Capital One and Citigroup have plummeted 46.6%, 38.5% and 31.7%, respectively.

What’s Next?

Over the next five trading days, bank earnings will continue in full force. Capital One and Comerica are slated to release quarterly numbers on Jul 21, while KeyCorp is set to report on Jul 22. Further, Bank OZK and Fifth Third Bancorp are scheduled to announce results on Jul 23.

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U.S. Bancorp (USB): Free Stock Analysis Report

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

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Wells Fargo Company (WFC): Free Stock Analysis Report

Truist Financial Corporation (TFC): Free Stock Analysis Report

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