BlackRock (NYSE: BLK), the world’s largest investment management company kicked off fourth quarter earnings with the major money center banks. Q4 earnings rose 6% to $10.63 a share from $10.02 a share year earlier. Revenues rose 14% to $5.106 billion versus $4.5 billion. Net inflows rose to $211.7 billion, up from $126.9 billion the prior year. JPMorgan Chase (NYSE: JPM), Citigroup (NYSE:C) and Wells Fargo (NYSE: WFC) are also reporting on Friday. Investors look for insights into BLK, the market and the economy from BlackRock CEO Larry Fink.
BlackRock Q4 2021
Q4 2021 earnings before the bell; conference call at 8:30 a.m. ET Friday
- $10.63 a share from $10.02 a share year earlier. Projected EPS: $10.10
- $5.106 billion from $4.5 billion a year earlier. Projected revenue: $5.12 billion
- Net inflows rose to $211.7 billion, up from $126.9 billion a year earlier
- Total asset sunder management exceeded $10 trillion in the fourth quarter, up 15% from $8.68 trillion a year earlier.
- Q4 operating profit margin dipped to 39.9% on a GAAP basis from 41.3% a year earlier, on an adjusted basis, it declined to 45.5% from 46.6% a year earlier, the company reported.
For the year, BlackRock’s earnings rose 20% to $5.90 billion, or $38.22 a share from revenue of $19.37 billion. This compares to last year’s profit of $4.93 billion, or $31.85 a share, on revenue of $16.2 billion in 2020. The firm reported $539.7 billion of net inflows in 2021, including $267 billion of active net inflows.
BlackRock income from its ETF and investment management income continues to soar being the largest investment management company in the world with assets under management over $10.0 trillion as of December 2021.
In a statement, Larry Fink, BlackRock’s CEO, noted the firm had “delivered the strongest organic growth” in its history, even as assets under management reached new highs.
“Our business is more diversified than ever before – active strategies, including alternatives, contributed over 60% of 2021 organic base fee growth.,” Fink said. “As the world continues to navigate uncertainty and profound shifts in economies and societies at large, BlackRock remains focused on helping our clients meet their investment goals.”
BlackRock recently announced that it is pulling $2 trillion of assets that had been managed by State Street (NYSE: STT). BlackRock says it will reduce its reliance on a single outside investment manager and help to lower its costs for back-office workers. BlackRock said it plans to move the administrative and accounting tasks that State Street had performed to other lenders, such as Citigroup and Bank of New York Mellon Corp. (NYSE: BK).
Bank Release Schedule
- JPMorgan Chase, Citi and Wells Fargo report earnings on Friday. The world’s largest asset manager BlackRock (BLK) also reports.
- US Bancorp and Bank of America release their earnings on Wednesday, January 19 with investment banking powerhouse Morgan Stanley.
- Goldman Sachs is due to report earnings on Tuesday, January 18.
The earnings come after a week that has seen many banks stocks hit 52-week highs. The Invesco KBW Bank ETF, which has Bank of America, Wells Fargo, JPMorgan Chase, US Bancorp and Citigroup as its top holdings, is up over 8% already this year and more than 19% in the past six months. Fourth-quarter corporate earnings likely benefited from this firming economic backdrop.
- Q4 2021 earnings before the open; conference call at 11 a.m. ET Friday
- Projected EPS: $1.55
- Projected revenue: $16.92 billion
Shares of Citigroup have been lagging behind other bank stocks. Since January 2021, C is down 1.69%) at $66.21 a share. Citigroup is currently undergoing changes under the leadership of Chief Executive Officer Jane Fraser and is in the process of exiting its consumer banking business in 13 markets around the world, a process that is expected to provide the bank with $7 billion in cash. Citi now operates consumer banking solely from 4 wealth centers: Singapore, Hong Kong, UAE, and London.
However, the exits from Australia and South Korea have not been smooth and cost Citigroup nearly $1.7 billion. Another black mark was Citigroup’s Board of Directors approved incentives that could see three executives in the bank earn up to $5 million in compensation based on the transformation’s success.
The stock has risen 12.6% since the company last reported earnings on Jan. 15.
Wells Fargo has been the top-performing stock among U.S. lenders over the past year, up over 60% to $54.67. With the seemingly endless major scandal involving fake accounts behind it and a new management team in place, Wells Fargo has been gaining support. $WFC has risen around 11% in the past month alone.
- Q4 2021 earnings before the bell; conference call at 10 a.m. ET Friday
- Projected EPS: $1.10
- Projected revenue: $18.67 billion
Overall, analysts and banks are looking for a strong earnings season, partly in response to the improving economy and the vaccine rollout but predominantly from the rise in interest rates with the Fed looking to raise rates. Banks will benefit from rising rates, provided that they don’t go up too rapidly and hurt demand for mortgages, credit cards and other loans.
There is that reputational risk hangs over the bank after a series of scandals that included creating fake customer accounts.
The brighter outlook for bank profits coincides with higher in Treasury yields. The benchmark 10-year Treasury yield has risen by over 70 basis points for the year-to-date, with higher interest rates boosting banks income from their core lending businesses. Big banks’ fourth-quarter results should get another boost from trading activity, given the stock markets record-setting rally and volatility in the bond markets. Fixed-income trading revenues have risen in the past year by the most in at least a decade across the bond trading divisions at Goldman Sachs, Citi, Morgan Stanley, JPMorgan and Bank of America.
- Q4 2021 earnings before the open; conference call at 8:30 a.m. ET Friday
- Projected EPS: $3.00
- Projected revenue: $29.85 billion
JPMorgan Chase $JPM, America’s largest bank kick off the banking sector’s Q4 22 earnings season on Friday before the market opens with expectations for strong earnings. Last quarter JP Morgan blew away consensus expectations on both profits and revenues.
JPM currently has total assets of nearly $4 trillion and remains the biggest bank in the world by market capitalization at $490.7 billion. JPMorgan Chase in December was fined $200 million by regulators for several “bookkeeping failures” and for letting employees use personal communications devices to send texts and emails about sensitive company business and evade authorities.
JPMorgan Chase & Co. (JPM) is expected to report revenues of $29.8 billion and earnings per share (EPS) of $2.98, based on a FactSet survey of 21 analysts.
The bank rally has been extended this year by expectations for the rise in rates not impacting the economy reopening and infrastructure spending. The new surge in home prices has also buoyed optimism for the mortgage business and banks’ profits thereto.
Source: JPM, WFC, C, BLK,
Live From The Pit
From The TradersCommunity Research Desk