Bank Stocks Report Card: BAC, C, JPM, WFC

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Big bank stocks will need more than generally better-than-expected first-quarter earnings to stop lagging the broader market this year, but results from JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Co (NYSE:WFC), Bank of America Corp (NYSE:BAC) and Citigroup Inc (NYSE:C) revealed that each big bank is doing better, albeit it in different ways.

Bank Stocks Report Card: BAC, C, JPM, WFCNo, not one of the big banks is hitting on all cylinders. From ultra-low interest rates to sleepiness in certain trading markets, big banks could point to a variety of factors that hurt first-quarter results.

That said, each big bank was able to highlight an area of strength or two. In some cases, it was a pick-up in the mortgage market. Other big banks benefitted from greater trading activity or mergers and acquisitions. One big bank was even a cost-cutting hero.

But all these years after the financial crisis, big banks are hardly back to business as usual. New regulations ensure some profit engines are gone for good, but the real drag on big bank results is an economy — both in the U.S. and abroad — that refuses to accelerate.

If the generally solid first-quarter results can’t give big bank stocks a much needed boost, they should at least keep them from falling farther behind the S&P 500 this year.

Here’s our report card on big banks’ first-quarter results:

Big Bank Stocks Report Card: JPMorgan Chase & Co. (JPM)

JPM stock JPMorgan Chase NYSE:JPM JPM stockStreet Expectations: $1.40 per share
Q1 Earnings: $1.45 per share
Grade: B+

JPM may very well be on the comeback trail. Indeed, another quarter like the last one could get this bank stocks back to beating the market. The nation’s largest bank by assets beat estimates for only the second time in the last seven quarters, but it did so in reassuring fashion.

True, trading revenue did much of the heavy lifting — a welcome reversal after years of sleepy market action — but all major business lines chipped in as well. The mortgage business picked up on a pullback in rates. Lending showed signs of life, as well.

Working against JPM, revenue growth of more than 4% is great for a big bank these days — not to mention any company in the S&P 500 — but it’s not something to brag about. Before the crisis (and reams of new regulations), JPM was generating double-digit revenue growth.

Big Bank Stocks Report Card: Wells Fargo & Co (WFC)

jpm wfcStreet Expectations: 98 cents per share
Q1 Earnings:
$1.04 per share
Grade: 
B

Wells Fargo has long been the big bank with the healthiest operations. It’s also been the best big bank stock. Although nothing in WFC’s quarterly report changed any of that, it did show that even mighty Wells Fargo is human.

It was going to be all but impossible for WFC to top last year’s record quarterly results. That’s largely why profits declined year-over-year for the first time in more than four years. But there were some worrisome weaknesses in the period too.  

Generationally low net interest margins continue to plague WFC’s profitability. (It really could use that rate hike.) Additionally, exposure to the oil and gas industry caused WFC’s loan-loss reserves to expand.

On the plus side, WFC, the nation’s largest mortgage business got a lift from a stronger housing market. Loan growth likewise grew smartly.

Big Bank Stocks Report Card: Citigroup Inc (C)

Citigroup earningsStreet Expectations: $1.39 per share
Q1 Earnings:
$1.52 per share
Grade:
 C+

Citigroup has been shrinking and streamlining itself for years, and the latest quarterly earnings report showed that it might finally pay off. C reported its best quarterly since before the financial crisis, thanks to greater-than-expected cost cuts.

Citigroup has had a number of false dawns in the post-crisis period, so it’s wise not to get too excited about its Street-beating results. And yet credit must be paid to Citigroup for the progress that it’s made. The bank cut costs by 10%. Profits from consumer banking increased 3%. Advisory fees on mergers and acquisitions ballooned 70%.

But the cost cuts were the star of the show. Citigroup could use at least one more quarter of boosting earnings by dramatically by slimming down in order to make believers of much of the market.

If nothing else, the most recent report showed that the bank’s strategy is sound.

Big Bank Stocks Report Card: Bank of America Corp (BAC)

bank of america shpg stock c stock bac stock market todayStreet Expectations: 29 cents per share
Q1 Earnings:
 30 cents per share
Grade:
 C-

BAC earnings revealed several areas enjoying solid growth — as well as solid expense reductions — but revenue failed to grow even as JPM and WFC posted top-line gains. Indeed, investors can be excused if  they looked at the good news/bad news report and wondered just what the “real” BAC is.

Easy comparisons certainly helped, but a number of BofA’s businesses reported honest-to-goodness improvement, boosted by a somewhat healthier economy and volatility in certain markets. The consumer banking division saw deposit balances grow 5%, for example. Mortgage volume increased of 55% year-over-year. Client brokerage assets rose 18%. Wealth management fees increased 10%.

On the other hand, total revenue, excluding adjustments, fell 6% to $21.4 billion, which was short of analysts’ average estimate, according to a survey by Thomson Reuters. Earnings per share on an adjusted basis came up short of Street targets, too.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/04/bank-stocks-bac-c-jpm-wfc/.

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