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Bank Stock Roundup: JPM, C, WFC, BAC & PNC in Focus on Q4 Earnings Beat
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Major banks’ Q4 earnings have been in full swing over the past four trading days. Almost all banks, including JPMorgan (JPM - Free Report) , Citigroup (C - Free Report) , Wells Fargo (WFC - Free Report) , Bank of America (BAC - Free Report) and PNC Financial (PNC - Free Report) that announced quarterly results, beat earnings estimates on revenue strength, decent rise in loan demand and provision benefit.
During the fourth quarter, a modest rise in loan demand drove net interest income (NII). However, major banks’ net interest margin growth was hampered by considerable deposits in their balance sheets and lower interest rates.
On the fee income front, major banks’ top line received support from the solid performance of investment banking (IB) and equity trading businesses, while dismal fixed-income trading performance and weakness in mortgage banking were disappointing. Consumer banking business improved, as reflected in the increase in usage of debit/credit cards.
Reserve release by major banks (driven by improving economic outlook) supported the results. Overall, banks’ balance sheet and liquidity positions remained solid.
On the other hand, as major banks continued to spend heavily on technology upgrades and undertook efforts to streamline operations, expenses rose during the quarter. Also, a rise in compensation and benefit costs led to higher costs. Further, management commentary surrounding expenses disappointed investors, leading to a pessimistic stance.
This, along with bearish sentiments across the broader markets, weighed heavily on major banks’ share price movement over the past four trading sessions.
1. Robust advisory business, reserve release and a rise in loan demand drove JPMorgan’s fourth-quarter 2021 earnings of $3.33 per share. The bottom line handily outpaced the Zacks Consensus Estimate of $3.01. Results included net credit reserve releases. Excluding this, earnings came in at $2.86 per share.
However, disappointing trading performance, lower interest rates and an increase in operating expenses were the major headwinds for JPMorgan’s quarterly results. Also, the company’s mortgage fees and related income plunged during the quarter.
2. Citigroup delivered an earnings surprise of 5.04% in fourth-quarter 2021. Income from continuing operations per share of $1.46 beat the Zacks Consensus Estimate of $1.39. However, the reported figure declined 24% from the prior-year quarter.
Citigroup’s investment banking revenues jumped, driven by equity underwriting and growth in advisory revenues. The dismal consumer banking business and higher operating expenses were the major headwinds.
3. Wells Fargo’s fourth-quarter 2021 earnings per share of $1.38 surpassed the Zacks Consensus Estimate of 1.09. Also, the bottom line improved 86% year over year. Results included certain non-recurring items.
Improved IB and other asset-based fees and strong equity gains in WFC’s affiliated venture capital and private equity businesses, as well as lower costs, supported the bank’s performance. Yet, a decline in NII due to low yields from earning assets and lower loans were the undermining factors.
4. Bank of America’s fourth-quarter 2021 earnings of 82 cents per share beat the Zacks Consensus Estimate of 76 cents. The bottom line compared favorably with 59 cents earned in the prior-year quarter. Results in the quarter included a net reserve release of $851 million.
Solid improvement in the lending scenario, consumer spending and economic rebound supported Bank of America’s NII growth. Further, robust IB performance and asset management business acted as tailwinds. However, trading numbers were not so impressive.
5. PNC Financial pulled off a fourth-quarter 2021 earnings surprise of 1.94% on substantial recapturing of credit losses. Earnings per share, as adjusted (excluding pre-tax integration costs related to the BBVA USA acquisition), of $3.68 surpassed the Zacks Consensus Estimate of $3.61 and improved 12.5% year over year.
Fee income growth on higher asset management revenues and corporate services supported PNC Financial’s results. However, higher expenses, margin contraction and a decline in loans were the headwinds.
Price Performance
Here is how the seven major stocks performed:
Image Source: Zacks Investment Research
Over the past four trading sessions, shares of U.S. Bancorp plunged 10%, while that of PNC Financial tanked 6.9%.
What’s Next in the Banking Space?
Over the next five trading days, the earnings season will continue full-fledged, with a number of banks coming out with their quarterly numbers. Also, investors will watch for clues on the timing of interest rate hikes at the end of the two-day FOMC meeting, which is scheduled on Jan 25-26.
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Bank Stock Roundup: JPM, C, WFC, BAC & PNC in Focus on Q4 Earnings Beat
Major banks’ Q4 earnings have been in full swing over the past four trading days. Almost all banks, including JPMorgan (JPM - Free Report) , Citigroup (C - Free Report) , Wells Fargo (WFC - Free Report) , Bank of America (BAC - Free Report) and PNC Financial (PNC - Free Report) that announced quarterly results, beat earnings estimates on revenue strength, decent rise in loan demand and provision benefit.
During the fourth quarter, a modest rise in loan demand drove net interest income (NII). However, major banks’ net interest margin growth was hampered by considerable deposits in their balance sheets and lower interest rates.
On the fee income front, major banks’ top line received support from the solid performance of investment banking (IB) and equity trading businesses, while dismal fixed-income trading performance and weakness in mortgage banking were disappointing. Consumer banking business improved, as reflected in the increase in usage of debit/credit cards.
Reserve release by major banks (driven by improving economic outlook) supported the results. Overall, banks’ balance sheet and liquidity positions remained solid.
On the other hand, as major banks continued to spend heavily on technology upgrades and undertook efforts to streamline operations, expenses rose during the quarter. Also, a rise in compensation and benefit costs led to higher costs. Further, management commentary surrounding expenses disappointed investors, leading to a pessimistic stance.
This, along with bearish sentiments across the broader markets, weighed heavily on major banks’ share price movement over the past four trading sessions.
(See the last bank stock roundup here: Bank Stock Roundup for the Week Ending Dec 24, 2021)
Re-cap of the Week’s Important Earnings
1. Robust advisory business, reserve release and a rise in loan demand drove JPMorgan’s fourth-quarter 2021 earnings of $3.33 per share. The bottom line handily outpaced the Zacks Consensus Estimate of $3.01. Results included net credit reserve releases. Excluding this, earnings came in at $2.86 per share.
However, disappointing trading performance, lower interest rates and an increase in operating expenses were the major headwinds for JPMorgan’s quarterly results. Also, the company’s mortgage fees and related income plunged during the quarter.
2. Citigroup delivered an earnings surprise of 5.04% in fourth-quarter 2021. Income from continuing operations per share of $1.46 beat the Zacks Consensus Estimate of $1.39. However, the reported figure declined 24% from the prior-year quarter.
Citigroup’s investment banking revenues jumped, driven by equity underwriting and growth in advisory revenues. The dismal consumer banking business and higher operating expenses were the major headwinds.
3. Wells Fargo’s fourth-quarter 2021 earnings per share of $1.38 surpassed the Zacks Consensus Estimate of 1.09. Also, the bottom line improved 86% year over year. Results included certain non-recurring items.
Improved IB and other asset-based fees and strong equity gains in WFC’s affiliated venture capital and private equity businesses, as well as lower costs, supported the bank’s performance. Yet, a decline in NII due to low yields from earning assets and lower loans were the undermining factors.
4. Bank of America’s fourth-quarter 2021 earnings of 82 cents per share beat the Zacks Consensus Estimate of 76 cents. The bottom line compared favorably with 59 cents earned in the prior-year quarter. Results in the quarter included a net reserve release of $851 million.
Solid improvement in the lending scenario, consumer spending and economic rebound supported Bank of America’s NII growth. Further, robust IB performance and asset management business acted as tailwinds. However, trading numbers were not so impressive.
5. PNC Financial pulled off a fourth-quarter 2021 earnings surprise of 1.94% on substantial recapturing of credit losses. Earnings per share, as adjusted (excluding pre-tax integration costs related to the BBVA USA acquisition), of $3.68 surpassed the Zacks Consensus Estimate of $3.61 and improved 12.5% year over year.
Fee income growth on higher asset management revenues and corporate services supported PNC Financial’s results. However, higher expenses, margin contraction and a decline in loans were the headwinds.
Price Performance
Here is how the seven major stocks performed:
Over the past four trading sessions, shares of U.S. Bancorp plunged 10%, while that of PNC Financial tanked 6.9%.
What’s Next in the Banking Space?
Over the next five trading days, the earnings season will continue full-fledged, with a number of banks coming out with their quarterly numbers. Also, investors will watch for clues on the timing of interest rate hikes at the end of the two-day FOMC meeting, which is scheduled on Jan 25-26.