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JPMorgan and Citigroup are part of Zacks Earnings Preview

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For Immediate Release

Chicago, IL – January 17, 2022 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes JPMorgan JPM and Citigroup C.

Banks Provide Mixed Start to Q4 Earnings Season

JPMorgan and Citigroup shares lost ground as they kick-started the Q4 earnings season for the banks. JPMorgan beat EPS estimates, but missed on revenues that were up +1.7% from the same period last year. Citi also missed top-line expectations, with 2021 Q4 revenues down -0.9% from the year-earlier period.

The tone and substance of management commentary about the current and coming periods was cautious, with JPMorgan, in particular, warning about “…a couple of years of sub-target returns.” A notable disappointment for the market was the outlook for costs at JPMorgan, which are expected to reach $77 billion in 2022 up from $71 billion in 2021.

The capital markets business remained red hot, though activity levels in Q4 were below the record levels of the preceding quarters. Trading revenues were down -11% at JPMorgan and -17% at Citigroup, mostly on weakness in fixed income trading.

On the positive side, the outlook for loan demand has been steadily improving, with consumers starting to rely more on credit to sustain spending. The loan portfolio increased +6% at JPMorgan and +3% at Wells Fargo, with the same at Citigroup only modestly above the year-earlier level.

This is a favorable setup for the regional banks that will be reporting December-quarter results in the coming days. And with the outlook for interest rates improving given expectations of multiple Fed rate hikes in 2022, this core banking activity promises to become a lot more profitable than has been the case in recent years.

With respect to the sector’s Q4 earnings season scorecard, we now have results from 17.6% of the sector’s market capitalization in the S&P 500 index. Total earnings for these Finance sector companies are up +3.6% from the same period last year on +1.8% higher revenues, with all the companies beating EPS estimates (100% EPS beats percentage) and 60% beating revenue estimates.

This is a weaker showing than we have seen from this group of banks in other recent periods.

Next week will bring results from Bank of America, Goldman Sachs, Morgan Stanley and all the regional banks. Trends in loan portfolios and the outlook for costs will likely determine how the market responds to those results.

The Overall Earnings Picture

Beyond the Finance sector, the expectation is for Q4 earnings for the S&P 500 index to be up +20.9% from the same period last year on +11.7% higher revenues. This would follow +41.4% earnings growth on +17.3% revenue growth in 2021 Q3.

The growth pace is expected to decelerate meaningfully over the coming quarters, but still remain positive.

Q4 Earnings Season Gets Underway

Friday’s results from JPMorgan, Citi and others (unofficially) kick-started the Q4 earnings season. But from our perspective, the reporting cycle was well underway before these banks' results arrived. Including the three major banks that reported Friday morning, we now have 26 S&P 500 members.

We have more than 90 companies on deck to report results this week, including 37 S&P 500 members. The Finance sector dominates this week’s reporting docket, with Netflix and few airlines and railroad operators as the other major reports this week.

For the 26 index members that have reported already, total Q4 earnings or aggregate net income is up +19.2% from the same period last year on +11.7% higher revenues, with 88.5% of the companies beating EPS estimates and 84.6% beating revenue estimates.

This is yet too small a sample to draw any firm conclusions from.

For an in-depth look at the overall earnings picture and expectations for the coming quarters, please check out our weekly Earnings Trends report >>>> The Q4 Earnings Season Gets Underway

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