The fourth-quarter 2019 earnings season began earlier this week with some of the country’s major financial institutions impressing with their numbers. The financial sector companies’ decent show came despite headwinds such as Federal Reserve’s interest rate cuts last year, U.S.-China trade issues and concerns over global economic growth.
Behind Q4 Growth in Financial Sector
The Financial Select Sector SPDR Fund (XLF) added about 12.3% in the fourth quarter. What’s more, the sector ranks third in witnessing growth (58.8%) among the broader S&P 500 sectors in the last five years.
Financial services companies flourished in a low-interest-rate environment. Last year, the country’s central bank cut benchmark rates thrice — in July, September and October. The current benchmark rates are in the range of 1.5 to 1.75%.
The low-rate environment coupled with remarkable job additions in October and November encouraged consumers to spend. In addition, record holiday sales, especially boosted by considerable online shopping, increased the frequency of digital and mobile payments.
Therefore, in the fourth quarter of 2019, large financial institutions with vast retail operations flourished. Specifically, companies such as Bank of America Corporation BAC, JPMorgan Chase & Co. JPM and Citigroup Inc. C surpassed analysts’ estimates courtesy of cashless transactions.
4 Must-Buy Financial Services Stocks
Keeping the aforementioned factors in mind, we have selected four financial services companies that reported impressive fourth-quarter 2019 earnings. All of these companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Bank of America’s fourth-quarter 2019 earnings of 74 cents per share surpassed the Zacks Consensus Estimate of 68 cents on the back of improved trading and strong underwriting performance. In fact, the figure was 6% higher than that of fourth-quarter 2018.
The bank’s sales and trading revenues rose 13%on year-over-year basis, driven by a 25% rise in fixed income trading.Investment banking fees increased 9% as underwriting fees rose. Equity underwriting income and debt underwriting fees grew 18% and 14%, respectively. The company’s net revenues of $22.3 billion beat the Zacks Consensus Estimate of $22 billion as well, although marginally. (Read more)
The Zacks Consensus Estimate for Bank of America’s current-year earnings has moved 1% north over the past 60 days. Shares of the company have risen 18.7%, outperforming the Zacks Banks - Major Regional industry’s rise of 16.9% over the last six months.
JPMorgan Chase’s fourth-quarter 2019 earnings of $2.57 per share easily beat the Zacks Consensus Estimate of $2.32, thanks to better-than-expected trading performance and an increase in mortgage banking fees.
The major reason behind the rise in mortgage banking fees (up 133%) were lower interest rates, primarily because of a 94% rise in mortgage origination volume. In addition, both equity and debt underwriting fees improved as expected, increasing 10% and 11%, respectively.
In addition, fixed income markets’ revenues went up 86%, thanks to strong client activity across products. Similarly, strong equity markets’ performance also boosted equity markets’ revenues by 15%.
Finally, net revenues for the quarter were $28.3 billion, up 9% from fourth-quarter 2018 and beat the Zacks Consensus Estimate of $27.3 billion. The overall Q4 performance of JPMorgan’s business segments was decent, in terms of net income generation. All segments of the bank minus Commercial Banking reported an increase in net income on a year-over-year basis. (Read more)
The Zacks Consensus Estimate for JPMorgan Chase’s current-year earnings has moved 1% north in the past 60 days. Shares of the company have risen 32.8%, outperforming the Zacks Banks - Major Regional industry’s rise of 20.6% over a year.
The PNC Financial Services Group, Inc.PNC reported earnings per share of $2.97 for fourth-quarter 2019, which surpassed the Zacks Consensus Estimate of $2.92. The company’s earnings were boosted by its higher revenues, which were driven by higher net interest income and escalating fee income.
PNC Financial Services’ net income for the quarter was $1.38 billion against fourth-quarter 2018’s $1.35 billion. Total revenues for the reported quarter were $4.6 billion, reflecting a 6% rise on a year-over-year basis. In addition, it outpaced the Zacks Consensus Estimate of $4.5 billion. The company’s net interest income also climbed slightly from the year-ago quarter to $2.5 billion. (Read more)
The Zacks Consensus Estimate for PNC Financial Services’ current-year earnings has moved 2.2% north over the past 60 days. Shares of the company have risen 26.4%, outperforming the Zacks Banks - Major Regional industry’s rise of 20.6% over a year.
BlackRock, Inc. BLK reported fourth-quarter 2019 earnings of $8.34 per share, beating the Zacks Consensus Estimate of $7.67. The major factor behind the world’s largest asset manager’s impressive earnings was strong flows into its exchange-traded fund business, which increased overall assets under management.
Strong inflows helped BlackRock pour $128.84 billion in new money in the said quarter. These helped raise total assets to $7.43 trillion.
For fourth-quarter 2019, the New York-based company’s cash management business drew net inflows of $29.8 billion, raising total assets for the business to $545.95 billion. The company’s revenues of $3.98 billion for the quarter ended December 2019 also outpaced the Zacks Consensus Estimate by 2.5%. (Read more)
The Zacks Consensus Estimate for BlackRock’s current-year earnings has moved 0.9% north over the past 60 days. Shares of the company have risen 28.6%, outperforming the Zacks Financial - Investment Management industry’s rise of 7.7% over a year.
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Click to get this free report JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report The PNC Financial Services Group, Inc (PNC) : Free Stock Analysis Report Bank of America Corporation (BAC) : Free Stock Analysis Report Citigroup Inc. (C) : Free Stock Analysis Report BlackRock, Inc. (BLK) : Free Stock Analysis Report To read this article on Zacks.com click here.