What to Expect From C, CMA, USB and BAC in Q4 Earnings?

Zacks Equity Research Published on January 15, 2018

The earnings season seems to have gotten off to a decent start with the banking giants reporting improved earnings and revenues so far.

The banks that have released results till now reported higher revenues supported by improved loan balances and hike in interest rates. However, lower mortgage and trading revenues impacted fee income to some extent.

The last three months of 2017 saw significant changes, stretching from passage of tax reform to Federal Reserve’s goal to continue raising rates steadily. The potential rise in equity issuances and persistent increase in debt underwriting has led to strengthening of investment banking. Also, the broader trends might lend banks some respite from the prevailing low volatility in the market. However, poor commercial and industrial loan growth during the quarter remains a concern.

Per the latest Earnings Preview, overall earnings for the major banks in fourth-quarter 2017 are projected to decline 2.6% year over year.

Earnings releases are coming in thick with Citigroup (C - Free Report) and Comerica Incorporated (CMA - Free Report) reporting on Jan 16, while U.S. Bancorp (USB - Free Report) and Bank of America (BAC - Free Report) are scheduled to report on Jan 17, before the opening bell.

Let’s have a look at what can be expected from these three Major Regional Banks when they report fourth quarter and 2017 earnings.

Citigroup’s earnings are expected to be $1.18, reflecting 4.4% improvement from the last-year quarter.

Also, the Zacks Consensus Estimate for sales is $17.1 billion, slightly higher than the prior-year quarter. Rise in loans along with a favorable interest rate environment is likely to benefit the bank’s net interest income (NII). Fee income is expected to benefit from strong momentum in investment banking business, partially offset by lower volume of M&A and poor mortgage activities during the quarter.

Nevertheless, the tax reform is expected to hurt its results for the quarter. The company expects a one-time charge of $16-$17 billion related to the write-down of deferred tax assets (DTAs) and charge related to cash repatriation to be around $3-$4 billion. (Read more: Will Citigroup Q4 Earnings Disappoint on Trading Slump?)

The bank carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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