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Bank Stock Roundup: Q2 Earnings Season Kicks Off with JPMorgan Beat
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Due to the commencement of the Q2 earnings season, all eyes were on the banking sector over the last five trading sessions. Like the past few quarters, earnings expectations for the sector are not encouraging.
However, JPMorgan Chase & Co. (JPM - Free Report) proved analysts wrong by reporting an earnings beat on July 14. In fact, its results helped the financial stocks rallying in the trading session. Now, it is to be seen whether other banks can also impress the market.
Overall, the sector continues to face challenges related to global growth worries, lower demand for loans, ambiguity over the timing of the next Fed rate hike, low levels of client activities and volatility in oil prices. Further, the Brexit fallout also adds to the concerns.
1. Driven by improved trading revenues, JPMorgan Chase & Co. second-quarter 2016 earnings handily outpaced the Zacks Consensus Estimate. Improved fixed income and equity trading revenues, and rise in mortgage banking fees drove the results. Further, higher net interest income, a decent decrease in operating expenses and a legal benefit aided the bottom line growth. However, a fall in investment banking income and higher provisions marginally hurt the results. (Read more: JPMorgan Beats Q2 Earnings as Trading Income Rises.)
2. Bank of the Ozarks, Inc. reported a positive surprise of 3.5% in its second-quarter 2016 earnings release. Better-than-expected results were driven a rise in net interest income, service charge on deposit accounts, mortgage lending income & trust income during the quarter. However, rising provision for credit losses and declining other income from purchased loans and gain on sale of other assets were undermining factors. (Read more: Bank of the Ozarks Q2 Earnings Beat, Stock Up.)
3. KeyCorp. (KEY - Free Report) announced the receipt of regulatory approval from the Federal Reserve for its proposed acquisition of First Niagara Financial Group Inc. The deal is expected to be completed by Aug 1, subject to customary closing conditions. Apart from this, KeyCorp provided updates related to branch locations post completion of the deal. (Read more: KeyCorp's First Niagara Deal Gets Fed's Nod: What's Next?)
4. Citigroup Inc. (C - Free Report) agreed to pay $7 million to the Securities and Exchange Commission (SEC) to settle charges that accused the company of providing incomplete ‘blue sheet’ data related to trades executed. Further, the company admitted to the wrong doings.
The SEC alleged that over a period of 15 years (ending Apr 2014), Citigroup omitted 26,810 transactions “from its responses to more than 2,300 blue sheet requests.” The company had given the reason for omission as technical glitch in the software that used to process the SEC’s requests for blue sheet information. Moreover, the company did not notify the same to the SEC nor did it take any steps to retrieve data until none months later.
Price Performance
Overall, the performance of the banking stocks reflected optimism driven by a decent start to the earnings season. Here is how the seven major stocks performed:
Company
Last Week
6 months
JPM
3.7%
10.2%
BAC
3.6%
-8.9%
WFC
2.4%
-3.4%
C
5.9%
-2.0%
COF
6.4%
6.6%
USB
2.9%
3.3%
PNC
2.8%
-4.6%
In the last five trading sessions, Capital One Financial Corp. (COF - Free Report) and Citigroup were the top performers, with their shares rising 6.4% and 5.9%, respectively. Moreover, JPMorgan shares increased 3.7%.
Over the last six months, JPMorgan and Capital One were the top gainers with their shares surging 10.2% and 6.6%, respectively. On the other hand, Bank of America Corp. (BAC - Free Report) and PNC Financial Services Group, Inc. (PNC - Free Report) shares declined 8.9% and 4.6%, respectively.
What's Next in the Banking Space?
Over the next five trading sessions, earnings reports will dominate the headlines. And the performance of banking stocks will majorly depend on the success of the results in impressing the market.
BofA will report on Jul 18, while Regions Financial Corp. (RF - Free Report) and Comerica Inc. (CMA - Free Report) will come out with results on Jul 19. Additionally, Capital One, The Bank of New York Mellon Corp. (BK - Free Report) and BB&T Corp. are slated to announce results on Jul 21.
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Bank Stock Roundup: Q2 Earnings Season Kicks Off with JPMorgan Beat
Due to the commencement of the Q2 earnings season, all eyes were on the banking sector over the last five trading sessions. Like the past few quarters, earnings expectations for the sector are not encouraging.
However, JPMorgan Chase & Co. (JPM - Free Report) proved analysts wrong by reporting an earnings beat on July 14. In fact, its results helped the financial stocks rallying in the trading session. Now, it is to be seen whether other banks can also impress the market.
Overall, the sector continues to face challenges related to global growth worries, lower demand for loans, ambiguity over the timing of the next Fed rate hike, low levels of client activities and volatility in oil prices. Further, the Brexit fallout also adds to the concerns.
BANKS-MAJOR REGIONAL Industry Price Index
BANKS-MAJOR REGIONAL Industry Price Index
(Read: Bank Stock Roundup for the week ending Jul 8, 2016)
Important Developments of the Week
1. Driven by improved trading revenues, JPMorgan Chase & Co. second-quarter 2016 earnings handily outpaced the Zacks Consensus Estimate. Improved fixed income and equity trading revenues, and rise in mortgage banking fees drove the results. Further, higher net interest income, a decent decrease in operating expenses and a legal benefit aided the bottom line growth. However, a fall in investment banking income and higher provisions marginally hurt the results. (Read more: JPMorgan Beats Q2 Earnings as Trading Income Rises.)
2. Bank of the Ozarks, Inc. reported a positive surprise of 3.5% in its second-quarter 2016 earnings release. Better-than-expected results were driven a rise in net interest income, service charge on deposit accounts, mortgage lending income & trust income during the quarter. However, rising provision for credit losses and declining other income from purchased loans and gain on sale of other assets were undermining factors. (Read more: Bank of the Ozarks Q2 Earnings Beat, Stock Up.)
3. KeyCorp. (KEY - Free Report) announced the receipt of regulatory approval from the Federal Reserve for its proposed acquisition of First Niagara Financial Group Inc. The deal is expected to be completed by Aug 1, subject to customary closing conditions. Apart from this, KeyCorp provided updates related to branch locations post completion of the deal. (Read more: KeyCorp's First Niagara Deal Gets Fed's Nod: What's Next?)
4. Citigroup Inc. (C - Free Report) agreed to pay $7 million to the Securities and Exchange Commission (SEC) to settle charges that accused the company of providing incomplete ‘blue sheet’ data related to trades executed. Further, the company admitted to the wrong doings.
The SEC alleged that over a period of 15 years (ending Apr 2014), Citigroup omitted 26,810 transactions “from its responses to more than 2,300 blue sheet requests.” The company had given the reason for omission as technical glitch in the software that used to process the SEC’s requests for blue sheet information. Moreover, the company did not notify the same to the SEC nor did it take any steps to retrieve data until none months later.
Price Performance
Overall, the performance of the banking stocks reflected optimism driven by a decent start to the earnings season. Here is how the seven major stocks performed:
Company
Last Week
6 months
JPM
3.7%
10.2%
BAC
3.6%
-8.9%
WFC
2.4%
-3.4%
C
5.9%
-2.0%
COF
6.4%
6.6%
USB
2.9%
3.3%
PNC
2.8%
-4.6%
In the last five trading sessions, Capital One Financial Corp. (COF - Free Report) and Citigroup were the top performers, with their shares rising 6.4% and 5.9%, respectively. Moreover, JPMorgan shares increased 3.7%.
Over the last six months, JPMorgan and Capital One were the top gainers with their shares surging 10.2% and 6.6%, respectively. On the other hand, Bank of America Corp. (BAC - Free Report) and PNC Financial Services Group, Inc. (PNC - Free Report) shares declined 8.9% and 4.6%, respectively.
What's Next in the Banking Space?
Over the next five trading sessions, earnings reports will dominate the headlines. And the performance of banking stocks will majorly depend on the success of the results in impressing the market.
BofA will report on Jul 18, while Regions Financial Corp. (RF - Free Report) and Comerica Inc. (CMA - Free Report) will come out with results on Jul 19. Additionally, Capital One, The Bank of New York Mellon Corp. (BK - Free Report) and BB&T Corp. are slated to announce results on Jul 21.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>