U.S. Markets close in 5 hrs 35 mins

The Zacks Analyst Blog Highlights: JPMorgan, Bank of America, Citigroup and U.S. Bancorp

Zacks Equity Research
Does Zebra Technologies (ZBRA) have what it takes to be a top stock pick for momentum investors? Let's find out.

For Immediate Release

Chicago, IL – March 2, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include JPMorgan JPM, Bank of America BAC, Citigroup C and U.S. Bancorp USB.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Thursday’s Analyst Blog:

FDIC-Insured Banks Q4 Earnings Fall on Tax Charges

Federal Deposit Insurance Corporation (FDIC)-insured commercial banks and savings institutions reported fourth-quarter 2017 earnings of $42.2 billion, down 2.3% year over year. Including the one-time tax-reform impact, net income came in at $25.5 billion, plunging 40.9% year over year.

Notably, community banks, constituting 92% of all FDIC-insured institutions, reported net income of $5.6 billion, up 17% on a year-over-year basis. Including the one-time tax-reform impact, net income came in at $4.1 billion, down 14.2% year over year.

Banks’ earnings were affected by elevated income taxes, higher non-interest expenses and loan loss provisions.

Banks, with assets worth more than $10 billion, accounted for a major part of earnings in the reported quarter. Though such banks constitute only 1.8% of the total number of domestic banks, these accounted for approximately 80% of the industry’s earnings. Leading names in this space include JPMorgan, Bank of America, Citigroup and U.S. Bancorp.

For 2017, FDIC-insured banks reported net income of $183.1 billion, up 7.2% year over year. Including the one-time tax-reform impact, net income came in at $164.8 billion, down 3.5% year over year.

Net Interest Income & Margin Rise, Non-Interest Income Falls, Costs Flare Up

As of Dec 31, 2017, the measure for profitability or average return on assets (ROA) edged down to 0.97% from 1.04% recorded as of Dec 31, 2016.

Net operating revenues were $192.2 billion, up 5.5% year over year. A rise in net interest income, partially offset by lower non-interest income, was a driving factor.

Net interest income was recorded at $129.5 billion, up 8.5% year over year, driven by rise in net interest income of 86.4% of banks. Net interest margin (NIM) inched up to 3.31% from 3.16% recorded in the year-earlier quarter owing to a rise in interest-bearing assets. This depicts the highest average margin for the industry since fourth-quarter 2012.

Non-interest income for the banks declined slightly year over year to $62.7 billion.

Total non-interest expenses for the establishments were $118 billion in the quarter, up 8.6% on a year-over-year basis, due to rise in other non-interest expenses.

Credit Quality: A Concern?

Overall, credit quality was a mixed bag in the reported quarter. Net charge-offs increased to $13.2 billion, up 8.7% year over year, reflecting the ninth quarterly rise. Notably, higher credit card charge-offs drove the upside.

In the reported quarter, provisions for loan losses for the institutions were $13.6 billion, up 8.9% year over year. The level of non-current loans and leases declined 11.8% year over year to $116.4 billion. The non-current rate was 1.20%, reflecting the lowest rate since third-quarter 2007.

Strong Loan & Deposit Growth

The capital position of the banks remained solid. Total deposits continued to rise and were recorded at $13.4 trillion, up 3.9% year over year. Further, total loans and leases were $9.7 trillion, up 4.5% year over year.

As of Dec 31, 2017, the Deposit Insurance Fund (DIF) balance increased to $92.7 billion from $83.2 billion as of Dec 31, 2016. Furthermore, interest earned on investment securities primarily led to growth in fund balance.

Two Bank Failures, Shrinking Problem Institutions, New Charter Added

During fourth-quarter 2017, two banks failed, one new charter was added, while 64 were merged. As of Dec 31, 2017, the number of ‘problem’ banks declined from 104 to 95. This signifies the lowest number in more than seven years, down from 888 recorded in first-quarter 2011. Total assets of the ‘problem’ institutions declined to $13.9 billion from $16 billion.

Notably, for 2017, five new charters were added, 230 institutions merged and eight banks failed.

Our Viewpoint

The decline in the number of problem institutions looks encouraging with the quarter witnessing top-line growth on higher NIM. Banks have been gradually easing lending standards and trending toward higher fees to counter pressure on the top line. In addition, more interest rate hikes will help ease the pressure on interest income. Also, continued expense control and stable balance sheets are likely to act as tailwinds in the upcoming quarters.

What encourages us is that a lot depends on to what extent Trump lives up to his promises. Bank stocks are likely to face the brunt if the promised policy goals are not achieved.

The Fed’s actions on expediting rate hike — which is again a function of economic growth based on Trump’s policy alterations — will also play a key role in keeping the optimism on bank stocks alive.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1 Stock of the Day pick for free.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Strong Stocks that Should Be in the News

Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year.See these high-potential stocks free >>.

Follow us on Twitter: https://twitter.com/zacksresearch

Join us on Facebook: https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

support@zacks.com

https://www.zacks.com/

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
 
U.S. Bancorp (USB) : Free Stock Analysis Report
 
Citigroup Inc. (C) : Free Stock Analysis Report
 
Bank of America Corporation (BAC) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.