Today's Must Read
New Branches, Loan Growth Aid JPMorgan (JPM) Amid Low Rates
Expense Saving Aids Bank of America (BAC) Amid Low Rates
Tuesday, June 30, 2020
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 16 major stocks, including Visa (V), JPMorgan Chase (JPM) and Bank of America (BAC). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Visa’s shares have outperformed the Zacks Financial Transaction Services industry over the past year (+10.2% vs. +4.2%). The Zacks analyst believes that a number of acquisitions and alliances as well as significant technology upgrades coupled with effective marketing have paved the way for Visa’s long-term growth.
Shift in payments to new methods such as mobile, cards, online and via wearables paves way for long term growth and have led to an increase in payments volume, cross-border volume and processed transactions.
The acquisition of Visa Europe is a growth strategy for the long haul. Its strong cash position enables the company to undertake effective capital deployment measures for its shareholders. However, high operating expenses weigh on its operating margins. Increase in client initiatives will be a drag on the company’s top line.
JPMorgan share have performed modestly better than the peer group over the past six months (down -32.5% vs. -37.1% for the Zacks Major Banks industry and -5.2% decline for the S&P 500 index), reflecting the company's strong capital position, dividend safety, and an overall well-regarded management team. The Zacks analyst believes that the acquisition of InstaMed, branch openings and focus on credit card business will continue aiding its financials. JPMorgan will be kicking off the June-quarter reporting cycle for the industry before the market's open on July 14th.
The bank surpassed the Zacks Consensus Estimate for earnings in three of the trailing four quarters. The company will be maintaining its current dividend payout level in the third quarter following the announcement of annual stress test results. Yet, the Fed’s accommodative policy and near-zero interest rates are expected to hurt the bank’s interest income and margins.
Also, coronavirus-induced concerns will likely continue to hamper business activities. Thus, loan growth will likely be muted in the near term. Challenges in expanding mortgage operations and significant dependence on capital market revenues will hurt fee income growth to an extent.
Bank of America shares have matched the performance of JPMorgan over the past six months, though the stock has lagged the broader market in a major way (-32.7% vs. -5.2% for the S&P 500 index), reflecting the tough operating environment characterized by weak economy and an unfavorable interest rate backdrop. That said, Bank of America is better placed than most of its peers, with opening new branches, improved digital offerings and efforts to manage costs likely to aid profitability.
Additionally, strong balance sheet and liquidity position are expected to continue supporting the company's financials amid economic slowdown. However, near-zero interest rates are expected to hurt the bank’s margins and interest income.
Also, coronavirus-induced concerns will likely continue to hamper business activities and thus, loan growth is expected to be muted. Further, dependence on capital markets performance makes us apprehensive, given its cyclical nature. This is likely to hurt fee income growth to some extent.
Other noteworthy reports we are featuring today include SAP SE (SAP), Chevron (CVX) and Eli Lilly (LLY).
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Director of Research
Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>