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Bank Stock Roundup: Q2 Earnings Take Center Stage; BofA, JPMorgan, Citi Outperform - Analyst Blog

The last five trading days were earnings-heavy for banking stocks. Effective cost-control measures including reorganization and absence of high legal expenses reaped benefits for banks outpacing the Zacks Consensus Estimates. These ultimately led to positive share price movement.

Further, with the economy gaining strength, consumer and commercial loan demand was on an upswing. However, the overall interest rate backdrop remains quite challenging for banks, adversely impacting their net interest margins. This has also impacted net interest income.

Overall performance of banks, however, remained impressive so far, which raised optimism among investors.

(Read the last Bank Stock Roundup for Jul 10, 2015)

Recap of the Week’s Most Important Earnings:

1. JPMorgan Chase & Co. JPM once again proved its caliber of turning the odds in its favor by widely beating on earnings. While industry-wide weakness in the key operating segments was palpable in the second quarter, the bank came up with earnings of $1.54 per share, crushing the Zacks Consensus Estimate of $1.44. The bottom line also improved 5.5% over the year-ago earnings of $1.46 per share. Most impressively, legal expense was as low as $291 million, which lent significant support to earnings.

This aside, JPMorgan’s operating expenses were down year over year, depicting that its cost-saving initiatives are paying off. Total noninterest expenses showed a sequential improvement too. However, provision for credit losses and revenues did not work in favor (Read more: JPMorgan's Expense Magic Casts Q2 Earnings Beat).

2. Lower non-interest expenses and a rise in revenues drove Bank of America Corporation’s BAC second-quarter 2015 earnings of 45 cents per share, which outpaced the Zacks Consensus Estimate of 36 cents. Further, the figure was up significantly from 19 cents earned in the prior-year quarter. Notably, BofA stated that the results included 4 cents per share of income related to favorable market-related net interest income adjustment.

Considering this, the company would have earned 41 cents per share. Further, a legal charge of $175 million was included in the results as well. Helped by top-line growth, BofA presented an encouraging picture (Read more: BofA Outperforms: Q2 Earnings Hardly Show Weakness).

3. U.S. Bancorp’s USB second-quarter 2015 earnings per share of 80 cents beat the Zacks Consensus Estimate by a penny. Moreover, results were above the prior-year quarter earnings of 78 cents. Better-than-expected results were aided by lower expenses and reduction in provisions. Moreover, a strong capital position and growth in average loans and deposits were the positives for the quarter. However, decrease in revenues was on the downside (Read more: U.S. Bancorp Q2 Earnings Rise Higher on Lower Expenses).

4. Driven by reduced expenses, Citigroup Inc. C delivered a positive earnings surprise of 7.4% in second-quarter 2015. The company’s adjusted earnings per share of $1.45 for the quarter outpaced the Zacks Consensus Estimate of $1.35. Further, earnings compared favorably with the year-ago figure of $1.24 per share. Adjusted net income jumped 18% year over year to $4.65 billion in the quarter.

Including the impact of credit valuation adjustment and debt valuation adjustment, Citigroup reported net income of $4.85 billion, compared to $181 million reported in the prior-year quarter. Notably, the prior-year quarter results were primarily impacted by the $3.8 billion mortgage settlement (Read more: Citigroup's Costs Plunge on Solid Q2 Earnings).

5. Impacted by higher expenses and reduced mortgage banking income, Wells Fargo & Company’s WFC earnings of $1.03 per share in second-quarter 2015 missed the Zacks Consensus Estimate by a penny. However, results were above the year-ago quarter earnings of $1.01 per share. The company experienced a rise in non-interest expenses, reduction in non-interest income and higher provisions on a year-over-year basis. However, total loans and deposits rose. Moreover, a strong capital position and returns on assets and equity acted as the positives (Read more: Wells Fargo Q2 Earnings Miss Estimates, Costs Up Y/Y).

Price Performance

Overall, the performance of banking stocks skyrocketed on impressive earnings. Most banking stocks showed a positive price movement. Here is how the seven major stocks performed:
 

Company

Last Week

6 months

JPM

3.7%

26.0%

BAC

7.5%

17.4%

WFC

3.7%

14.1%

C

7.4%

23.2%

COF

3.8%

19.7%

USB

5.6%

11.7%

PNC

3.6%

18.8%

 

In the last five trading sessions, BofA and Citigroup were major gainers, with their shares rising 7.5% and 7.4%, respectively. U.S. Bancorp too jumped 5.6%.

Over the last six months, JPMorgan and Citigroup were the top performers, with their shares surging 26% and 23.2%, respectively. Capital One Financial Corp. COF and The PNC Financial Services Group, Inc. PNC also climbed 19.7% and 18.8%, respectively.

What's Next in the Banking Universe?

In the coming five days, earnings releases will continue to remain in focus. Major banks that are scheduled to announce results are The Bank of New York Mellon Corporation BK, Fifth Third Bancorp FITB and Regions Financial Corporation RF on Jul 21, and Capital One Financial on Jul 23.

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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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