If you’re wondering which bank stocks to sell this month, look no further. U.S. banks have just reported their financial results for the fourth and final quarter of 2023, and it’s proven to be a mixed bag. While some commercial lenders and investment banks, such as JPMorgan Chase (NYSE:JPM) and Goldman Sachs (NYSE:GS), had strong prints, others missed the consensus targets of Wall Street analysts, sending their share prices lower.
Further, a few issues of concern have emerged from the Q4 bank earnings. These include the ongoing fallout from the failures last spring of several regional lenders across the U.S., as well as a continued lack of deals on Wall Street, i.e. mergers and acquisitions (M&A) and initial public offerings (IPOs). High interest rates are also continuing to impact loan issuance at the banks. Additionally, there is ongoing concern related to a slowing economy and potential recession, and how that might affect the earnings of financial institutions as we move through the year. Keeping all this in mind, here are three bank stocks to sell in January before they crash and burn.
Bank Stocks to Sell: Morgan Stanley (MS)
Investment bank Morgan Stanley’s (NYSE:MS) Q4 earnings weren’t great. The firm missed its profit target, reporting EPS of 85 cents, which was below consensus forecasts of $1.01. The bank blamed the profit miss on a one-time charge of $535 million that it incurred related to the regional bank bailouts last year. While revenue in Q4 totaled $12.90 billion, which was ahead of Wall Street estimates of $12.70 billion, it was little compensation for the disappointing profit number.
Adding to the gloomy tone of the Q4 print was that Morgan Stanley said M&A activity fell to its lowest level in 10 years globally in 2023, further hurting its profits. Earlier in January, Morgan Stanley agreed to pay nearly $250 million to end a long running criminal investigation into its handling of large stock trades. This was the first earnings report under new CEO Ted Pick, who succeeded James Gorman at the start of this year. It wasn’t a great start for Pick.
MS stock fell 4% on news of the bank’s Q4 results. In the last 12 months, Morgan Stanley’s share price has declined 11%.
Bank of America (BAC)
One of the worst Q4 earnings reports was from Bank of America (NYSE:BAC). The second largest lender in the U.S. reported financial results that fell far short of Wall Street expectations. Bank of America announced EPS of 35 cents, which was well below forecasts of 53 cents. The lender’s earnings were down 59% from 85 cents a year earlier. Revenue in Q4 totaled $21.96 billion, also below forecasts that called for $23.70 billion. Revenue was down 10% in Q4 from the previous year.
Management blamed the disappointing results on regulatory charges it has been forced to pay since last summer, including a $250 million fine related to junk fees. The poor print was especially disappointing as Bank of America was supposed to be a beneficiary of higher interest rates. However, the lender took on low-yielding, long-dated securities during the pandemic and they have lost value as interest rates have steadily risen. BAC stock has fallen 7% in the last 12 months and is up less than 10% through five years, making it a bank stock to sell.
Citigroup (C)
Bringing up the rear this earnings season is Citigroup (NYSE:C). The leading U.S. bank posted a $1.8 billion Q4 loss after booking charges tied to overseas risk, the regional bank failures, and CEO Jane Fraser’s corporate turnaround plan that involves mass layoffs and big severance payments. All told, the combined charges dinged Citigroup’s Q4 earnings to the tune of $4.66 billion, or $2 a share. Citigroup said it expects to incur an additional $1 billion in severance costs as it cuts 20,000 jobs worldwide.
There were variable top and bottom line numbers for Q4, with Citigroup reporting EPS of 84 cents, which beat forecasts of 81 cents. However, revenue of $17.44 billion fell short of expectations for $18.74 billion. Fraser called the Q4 earnings report “very disappointing,” but stressed that the lender is undergoing a multiyear transition and that progress is being made to shrink the bank and lessen its footprint overseas. Tell that to shareholders who have endured an 18% decline in C stock over the last five years.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
