Earnings season will start kicking into high gear this week, and one sector that will get plenty of attention is financials.
Analysts aren’t expecting a lot out of financials’ second-quarter reports, considering Q2 provided some pretty strong headwinds for the sector. Many banks are expected see revenue declines as loan demand — particularly in mortgage loans — has not been as strong as many were hoping. Larger banks with trading divisions might well be hurt by lower trading profits, too, as markets haven’t seen much of the type of volatility that drives trading desk revenues.
Meanwhile, many banks have pumped up profits the past few years by releasing loan loss reserves as credit conditions improved, but that trend is starting to fade now.
Financials’ earnings performance could end up having an outsized say in how the market does overall in the second half of the year. If banks mostly surprise to the upside, the sector could lead the market higher. However, if financials fall short of already limited expectations, they could spur selling.
That said, here are five financials to keep an eye on this week as they release second-quarter results:
Comerica, 7/15: Comerica (CMA) will report results before the bell Tuesday, and while the bank has posted five consecutive earnings beats, analysts don’t expect much from the Texas-based bank. The consensus is for Comerica to earn exactly the same as last year — 76 cents per share — on revenue growth of less than 1%. The consensus estimate has stayed steady for the past 90 days, so none of the analysts following CMA stock see anything to change their view in either direction as we get closer to earnings.
Renasant Corp., 7/15: After Tuesday’s close, we’ll see earnings from Mississippi-based Renasant Corp. (RNST). Renasant has a strong presence in the southeastern U.S. with 120 offices in Mississippi, Tennessee, Alabama and Georgia. Analysts are much more upbeat on the regional bank, expecting Renasant to earn 44 cents, compared to 32 cents a year ago, on a 36% gain in revenues. Estimates have increased by a penny in the past three months, so analysts seem to be confident that the bank has had a solid quarter.
Bank of America, 7/16: One of the most closely watched reports will come out Wednesday Bank of America (BAC). The analyst community has very low expectations for the mega-bank, with results estimated to be just 29 cents per share compared to 32 cents in the year-ago period, and revenues expected to drop by nearly 5%. One the biggest questions concerning Bank of America’s report is just how large of a litigation reserve it’ll need to set aside to cover the settlements under discussion with Department of Justice. Estimates range from $1 billion to more than $4 billion for the quarter. That said, given lackluster expectations, a positive surprise could lift BAC stock higher — and possibly take the broader market with it.
Fifth Third Bank, 7/17: On Thursday, we will get earnings results from Cincinnati-based Fifth Third Bank (FITB). The bank has been holding its own in difficult markets, but analysts are not expecting stellar results from this Midwest regional financial. Wall Street sees earnings plunging from 66 cents per share a year ago to 43 cents on a revenue decline of 21%. Estimates have remained steady for the past 90 days, likely meaning that no one seems to see any signs of improvement now that the quarter has ended. FITB reports before the bell.
Republic Bancorp, 7/17: Republic Bancorp (RBCAA) is expected to release its results sometime during the day Thursday. The current consensus estimate for RBCAA is for earnings of 32 cents per share compared to 30 cents in the year-ago period. Revenue estimates sit at nearly 4% growth for Q2. The Kentucky-based bank has posted four straight negative earnings surprises; investors are merely hoping RBCAA doesn’t make it a fifth. The bank did just announce its 15th consecutive year of higher dividends, raising its payout by 6%.
As of this writing, Tim Melvin did not hold a position in any of the aforementioned securities.