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Bank Stock Roundup: JPM, WFC, BAC, C, TFC & PNC in Focus as Q2 Earnings Start
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Major banks that reported second-quarter 2021 results this week beat earnings estimates on reserve releases and somewhat decent performance of fee income sources. Yet, investors remain concerned about subdued lending scenario (that has been plaguing banks since the start of coronavirus pandemic) and end of the trading boom, which has been supporting banks’ top line since last year.
Not so impressive management guidance for the later part of the year, despite robust economic growth expectations, has added fuel to fire. As such, investor sentiments remained on the pessimistic side and have dragged down most bank stocks over the past five trading days.
During the second quarter, low interest rates, flattening of the yield curve and soft loan demand led to a fall in net interest income and contraction of banks’ net interest margins. As banks continued to spend heavily on technology upgrades and undertook efforts to streamline operations, expenses rose during the quarter.
On the fee income front, major banks’ financials got support from the stellar performance of investment banking ("IB") business and decent mortgage banking operation, while trading performance disappointed. Consumer banking performance also offered some support, as reflected in the rise in usage of debit/credit cards and higher consumer confidence.
A large reserve release by major banks (driven by improving economic outlook) supported the results. Overall, banks’ balance sheet and liquidity positions remained solid.
1. Large reserve releases, solid IB performance and modest rise in loan demand drove JPMorgan’s (JPM - Free Report) second-quarter 2021 earnings of $3.78 per share. The bottom line handily outpaced the Zacks Consensus Estimate of $3.05. Results included credit reserve releases. Excluding this, earnings amounted to $3.03 per share. The company had earned $1.38 in the prior-year quarter.
2. Solid mortgage banking performance supported Wells Fargo’s (WFC - Free Report) second-quarter 2021 earnings of $1.38 per share, which surpassed the Zacks Consensus Estimate of 95 cents. The bottom line marked a significant improvement from the prior-year quarter’s loss of $1.01.
3. Bank of America’s (BAC - Free Report) second-quarter 2021 earnings of $1.03 per share handily beat the Zacks Consensus Estimate of 77 cents. The bottom line compared favorably with 37 cents earned in the prior-year quarter. Results in the quarter included provision benefits and gains from tax adjustment related to revaluation of the U.K. deferred tax assets.
4. Citigroup (C - Free Report) delivered a positive earnings surprise of 46.4% in second-quarter 2021. Income from continuing operations per share of $2.84 handily outpaced the Zacks Consensus Estimate of $1.94. Also, results compared favorably with 38 cents in the prior-year quarter.
5. PNC Financial (PNC - Free Report) pulled off a second-quarter 2021 positive earnings surprise of 42.4% on substantial reserve release. Adjusted earnings per share of $4.50 surpassed the Zacks Consensus Estimate of $3.16. The company’s results reflect the impacts of the BBVA USA acquisition, which was closed in June 2021.
6. Truist Financial’s (TFC - Free Report) second-quarter 2021 adjusted earnings of $1.55 per share easily surpassed the Zacks Consensus Estimate of $1.17. The bottom line jumped 89% from the prior-year quarter.
Price Performance
Here is how the seven major stocks performed:
Image Source: Zacks Investment Research
Over the past five trading days, U.S. Bancorp and Wells Fargo recorded maximum gains, with their shares rallying 3.2% and 2.5%, respectively. On the other hand, shares of Bank of America have lost 3% during the same period.
Over the past six months, Capital One shares of have surged 43.3%, while Wells Fargo and PNC Financial have jumped 41.2% and 24%, respectively.
What’s Next?
Over the next five trading days, the focus will solely be on earnings releases as some major banks are scheduled to report second-quarter numbers. KeyCorp is slated to announce results on Jul 20, while Comerica Incorporated will report on Jul 21. Fifth Third Bancorp, Capital One and Bank OZK are scheduled to come up with quarterly numbers Jul 22.
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Bank Stock Roundup: JPM, WFC, BAC, C, TFC & PNC in Focus as Q2 Earnings Start
Major banks that reported second-quarter 2021 results this week beat earnings estimates on reserve releases and somewhat decent performance of fee income sources. Yet, investors remain concerned about subdued lending scenario (that has been plaguing banks since the start of coronavirus pandemic) and end of the trading boom, which has been supporting banks’ top line since last year.
Not so impressive management guidance for the later part of the year, despite robust economic growth expectations, has added fuel to fire. As such, investor sentiments remained on the pessimistic side and have dragged down most bank stocks over the past five trading days.
During the second quarter, low interest rates, flattening of the yield curve and soft loan demand led to a fall in net interest income and contraction of banks’ net interest margins. As banks continued to spend heavily on technology upgrades and undertook efforts to streamline operations, expenses rose during the quarter.
On the fee income front, major banks’ financials got support from the stellar performance of investment banking ("IB") business and decent mortgage banking operation, while trading performance disappointed. Consumer banking performance also offered some support, as reflected in the rise in usage of debit/credit cards and higher consumer confidence.
A large reserve release by major banks (driven by improving economic outlook) supported the results. Overall, banks’ balance sheet and liquidity positions remained solid.
Image Source: Zacks Investment Research
(Read: Bank Stock Roundup for the Week Ending Apr 23, 2021)
Important Earnings of the Week
1. Large reserve releases, solid IB performance and modest rise in loan demand drove JPMorgan’s (JPM - Free Report) second-quarter 2021 earnings of $3.78 per share. The bottom line handily outpaced the Zacks Consensus Estimate of $3.05. Results included credit reserve releases. Excluding this, earnings amounted to $3.03 per share. The company had earned $1.38 in the prior-year quarter.
2. Solid mortgage banking performance supported Wells Fargo’s (WFC - Free Report) second-quarter 2021 earnings of $1.38 per share, which surpassed the Zacks Consensus Estimate of 95 cents. The bottom line marked a significant improvement from the prior-year quarter’s loss of $1.01.
3. Bank of America’s (BAC - Free Report) second-quarter 2021 earnings of $1.03 per share handily beat the Zacks Consensus Estimate of 77 cents. The bottom line compared favorably with 37 cents earned in the prior-year quarter. Results in the quarter included provision benefits and gains from tax adjustment related to revaluation of the U.K. deferred tax assets.
4. Citigroup (C - Free Report) delivered a positive earnings surprise of 46.4% in second-quarter 2021. Income from continuing operations per share of $2.84 handily outpaced the Zacks Consensus Estimate of $1.94. Also, results compared favorably with 38 cents in the prior-year quarter.
5. PNC Financial (PNC - Free Report) pulled off a second-quarter 2021 positive earnings surprise of 42.4% on substantial reserve release. Adjusted earnings per share of $4.50 surpassed the Zacks Consensus Estimate of $3.16. The company’s results reflect the impacts of the BBVA USA acquisition, which was closed in June 2021.
6. Truist Financial’s (TFC - Free Report) second-quarter 2021 adjusted earnings of $1.55 per share easily surpassed the Zacks Consensus Estimate of $1.17. The bottom line jumped 89% from the prior-year quarter.
Price Performance
Here is how the seven major stocks performed:
Image Source: Zacks Investment Research
Over the past five trading days, U.S. Bancorp and Wells Fargo recorded maximum gains, with their shares rallying 3.2% and 2.5%, respectively. On the other hand, shares of Bank of America have lost 3% during the same period.
Over the past six months, Capital One shares of have surged 43.3%, while Wells Fargo and PNC Financial have jumped 41.2% and 24%, respectively.
What’s Next?
Over the next five trading days, the focus will solely be on earnings releases as some major banks are scheduled to report second-quarter numbers. KeyCorp is slated to announce results on Jul 20, while Comerica Incorporated will report on Jul 21. Fifth Third Bancorp, Capital One and Bank OZK are scheduled to come up with quarterly numbers Jul 22.