Earnings Reports

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Earnings kicks off with reports from the major banks names including Wells Fargo (WFC), Goldman Sachs (GS) and JPMorgan Chase & Co (JPM) on Wednesday. On Thursday Bank of America (BAC), BlackRock (BLK), and Citigroup (C) report. Morgan Stanley (MS) and PNC Group (PNC) report Friday.

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Overall, analysts and banks are looking for a strong earnings season, partly in response to the improving economy and the vaccine rollout The earnings come after a euphoric week after a strong March jobs report and a market running without fear to new highs on the Dow and S&P 500.  First-quarter corporate earnings likely benefited from this firming economic backdrop.

Over the last several months, analysts have raised their aggregate S&P 500 earnings per share estimates by a record 6.0%, according to FactSet data.  The financial sector saw the second-largest increase in bottom-up EPS estimates of all 11 sectors in the S&P 500, according to FactSet, coming second only to the energy sector. Financials' EPS estimates were revised up by 13.1%, the second-largest quarterly increase for the sector since FactSet started tracking the metric in 2002.

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' first-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 rose by the most in at least a decade across the bond trading divisions at Goldman Sachs, Citi, Morgan Stanley, JPMorgan and Bank of America last quarter. 

The six biggest U.S. banks set aside more than $117 billion in so-called loan loss reserves last year as the economy plunged by more than 33% over the second quarter, the biggest on record . JPMorgan released around $2.9 billion of those reserves last quarter, however, a move that added 72 cents to its bottom line of $3.79 per share. BMO Capital Markets analysts expect the bank to release another $2 billion this quarter, with rivals Bank of America releasing $1.6 billion, Wells Fargo $1.5 billion and Citigroup $2.4 billion.

Bank stocks will likely require a new driver, said Deutsche Bank analyst Matt O'Connor, "The next big catalyst for bank stocks is likely to be the return of loan growth. Many view loan growth as one of the biggest long-term drivers of bank earnings and of higher quality than the boost from higher interest rates,"

Wednesday Earnings Reports

JPM Morgan Chase Consensus Expectations

Expectations are for EPS of $3.10, on revenue of $30.50 billion.

JPMorgan Chase $JPM, America's largest bank  kick off the banking sector's Q1 20 earnings season on Wednesday before the market opens with expectations for strong earnings. Last quarter JP Morgan blew away consensus expectations on both profits and revenues. Revenue for the period came in at $30.1bn,over the $28.7bn estimate. Investment banking revenue rose 37%.

JPMorgan Chase & Co. (JPM)  is expected to report adjusted net income of $9.3 billion, or $3.07 a share, on sales of $30.5 billion before the market opens on Wednesday, based on a FactSet survey of 21 analysts. In the same period a year ago the company posted earnings of 78 cents a share on sales of $29.1 billion. It reported a net income of $8.5 billion.

Last quarter trading revenue increased by 20%, while net interest income slipped by 7%, due to the flattish yield curve. This will be improved given the sell-off in the long end of the curve pushing yields higher. Last quarter the bank boosted its profit numbers by releasing $2.9bn in credit reserves, that it had set aside last year in respect of non-performing loans. The Federal Reserve also allowed the resumption of buybacks and dividends. Expectations are high that the economic reopening of the US economy could release more cash from reserves in the form of extra dividends.

BMO Capital Markets analysts expect JPMorgan's near-term outlook to focus on "the cadence of expected credit losses and whether the additional stimulus will reduce (or just delay) cumulative credit losses, capital management, including thoughts around M&A and share buybacks at JPM’s current valuation" as well as "the outlook for reserves releases and macro assumptions underpinning the reserve methodology."

 JPM First Quarter 2021 Earnings Report

The bank rally has been fueled by expectations for the economy reopening and infrastructure spending.  The new surge in home prices has also buoyed optimism for the mortgage business and banks profits thereto.

Wells Fargo Consensus Expectations

Expectations are for EPS of $0.69, on revenue of $17.50 billion.

Wells Fargo is expected to report first-quarter EPS of $0.69 (up from $0.01 a year ago) on revenue of $17.5 billion (down 1.2% year over year). Looking ahead for the second quarter, analysts estimate EPS of $0.74, up from a loss per share of $0.66 last year, on revenue of $17.31 billion (down 2.9% year over year). For the 2021 fiscal year, the current estimates call for EPS of $2.93 and revenue of $69.4 billion.

Exposure to the Archegos Capital Management implosion will be a key element in the conference call, Wells Fargo said late last month that it had been able to unwind its position without taking a loss. Likewise Goldman Sachs called its loss related to Archegos "immaterial".  Wells Fargo's still has a continuing regulatory cap on the bank's assets imposed by the Fed from previous scandals. Given that reputational risk hangs over the the bank after a series of scandals that included creating fake customer accounts.

WFC  First Quarter 2021 Earnings Report  

Goldman Sachs Consensus Expectations

Expectations are for EPS of $10.20, on revenue of $12.60 billion.

Goldman Sachs Group, Inc. (GS)  is expected to report adjusted net income of $3.7 billion, or $10.20 a share, on sales of $12.6 billion before the market opens on Wednesday, based on a FactSet survey of 19 analysts.

In the same period a year ago the company posted earnings of $3.11 a share on sales of $8.7 billion. It reported a net income of $1.9 billion. Goldman Sachs is moving to offer its wealthy clients investment options for bitcoin and other digital assets. 

Goldman Sachs blew away estimates in January with revenues of $11.74bn and profits of $12.08c a share. The banks equities division saw a 40% jump in revenues from a year earlier to $2.39bn. Investment banking had growth of 27% to $2.61bn.

Particular attention is likely to be on the bank’s equities operation after the blow up of Archegos Capital, and in particular how much the liquidations cost the bank. CEO David Solomon has embarked on a restructuring with a greater focus on wealth management.

The stock has risen 12.6% since the company last reported earnings on Jan. 19.

 GS First Quarter 2021 Earnings Report

Thursday Earnings Expectations

Citigroup Consensus Expectations

Expectations are for EPS of $2.57, on revenue of $18.80 billion.

Citigroup Inc. (C)  is expected to report adjusted net income of $5.4 billion, or $2.57 a share, on sales of $18.8 billion before the market opens on Thursday, based on a FactSet survey of 20 analysts. In the same period a year ago the company posted earnings of $1.05 a share on sales of $20.7 billion. It reported a net income of $5 billion.

The stock has risen 12.6% since the company last reported earnings on Jan. 15.

C First Quarter 2021 Earnings Report

Blackrock Consensus Expectations

Expectations are for EPS of $8.26, on revenue of $4.30 billion.

Blackrock is expected to post quarterly earnings of $8.26 per share for the first quarter, which represents a year-over-year change of +25.2%. Revenues are expected to be $4.3 billion, up 15.8% from the year-ago quarter.

BlackRock closed 2020 with $8.677 trillion in total assets under management. Its iShares platform is the leading domestic and global provider of exchange-traded funds generating solid organic growth. Analysts say BlackRock has the potential to generate 3%-5% average annual organic AUM growth.

Blackrock First Quarter 2021 Earnings Report

Bank of America Consensus Expectations

Expectations are for EPS of $0.63, on revenue of $21.74 billion.

America's second-largest bank is expected to post quarterly earnings of $0.63 per share for the first quarter, which represents a year-over-year change of +57.5%. Revenues are expected to be $21.74 billion, down 4.5% from the year-ago quarter.

Rising interest rates has a positive effect on Bank of America earnings. US 10-year Treasury yield has recently been rising as investors are becoming more optimistic about the US economy.  The benefit of a +100 basis points parallel shift up in interest rates is approximately $10.5 billion for BAC. 

Bank of America in their last earnings Report (Q4 of 2020) showed the Net Interest Yield of BAC declined strongly in the aftermath of the Coronavirus and now seems to have bottomed around the 1.90% level.  With the rise in rates a strong increase in the Net Interest Income of BAC. is expected. Currently, this Q4-2020 figure is still 15% below the level of Q4-2019 figure.

Bank of America has a total provision for credit losses of $ 11.32 billion as of Q4 FY-2020. This provisioned item assumes the bank will take billion-dollar losses on its credit portfolio which seems overestimated giving the current US economic forecasts are positive and assume a strongly growing US economy.  Bank of America is currently limited by the Federal Reserve in the total amount of money it can return to its investors. The Federal Reserve will execute stress tests to validate whether the capital return restrictions for banks can be lifted. Once these limitations are ended, this will enable banks to make themselves more attractive to investors. 

 BAC First Quarter 2021 Earnings Report

The bank rally has been fueled by expectations for a stronger economy and infrastructure spending.  The new surge in home prices has also buoyed optimism for the mortgage business and banks profits thereto.

Friday Earnings Expectations

PNC Financial Consensus Expectations

Expectations are for EPS of $2.71, on revenue of $4.11 billion.

PNC is expected to post quarterly earnings of $2.71 per share in its upcoming report, which represents a year-over-year change of +39%. Revenues are expected to be $4.11 billion, down 9% from the year-ago quarter.

The upcoming acquisition of BBVA USA Bancshares will likely be the biggest driver of balance sheet growth this year. PNC will close the acquisition in the mid of 2021. The acquisition will increase the loan portfolio size by around $66 billion or 27%. Apart from the acquisition, vaccine-driven recovery will also likely drive loan growth. The acquisition will likely improve the portfolio yield as it will soak up PNC’s excess liquidity. 

On the flip side, merger-related expenses will likely put a cap on the earnings growth this year.  The upcoming forgiveness of Paycheck Protection Program ("PPP") loans will likely constrain loan growth. As mentioned in their 10-K filing for 2020, PNC had $12 billion of PPP loans outstanding at the end of December, representing 5% of the loan portfolio. Considering the acquisition-related and organic growth, as well as the PPP forgiveness, Analysts are expecting the loan portfolio to increase by 25% by the end of 2021 from the end of 2020. 

PNC has also created a low-fee bank account that has received certification from the Cities for Financial Empowerment (CFE) Fund. The account will only charge customers $5 per month and have no charges for overdrafts or insufficient funds.

“We are committed to providing inclusive banking services for customers who may not have access to traditional checking or savings accounts,” said Bonnie Wikert, PNC executive vice president and head of retail segments and deposit products. “Our Smart Access prepaid debit card product is designed to help those customers conduct their banking in a safe and convenient manner.” 

PNC First Quarter 2021 Earnings Report

Morgan Stanley Consensus Expectations

Expectations are for EPS of $1.69 on revenue of  $13.81 billion

Morgan Stanley is expected to post quarterly earnings of $1.69 per share in its upcoming report, which represents a year-over-year change of +70.7%. Revenues are expected to be $13.81 billion, up 45.5% from the year-ago quarter.

Morgan Stanley full-year net revenues hit a record of $48.2bn in 2020, net income rose to $11bn, from $9bn the year before. In Q4  revenues were $13.64bn, well over $2bn above estimates. The outperformance was driven by investment banking and the equities trading division, which saw revenues surge $350m above estimates. Wealth management was a strong contributor,.

However in light of recent events, around Archegos Capital and Morgan Stanley’s involvement in it, questions are likely to be asked in terms of their risk processes, and how much the episode has cost the bank.

MS First Quarter 2021 Earnings Report

 

Source: JPM, WFC, PNC, C, BLK, MS, BAC

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