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Analyst Blog

Big banks – JPMorgan Chase & Co. (JPM - Free Report) , Bank of America Corporation (BAC - Free Report) , Wells Fargo & Company (WFC - Free Report) and Citigroup Inc. (C - Free Report) – have come up with better-than-expected Q3 results, despite a challenging operating environment. This lifted market sentiments for banking stocks considerably.

Banks’ trading revenues are likely to rise on the back of strength in fixed income and currencies. However, equity trading is likely to remain dismal. Further, mortgage banking income is projected to improve marginally during the quarter.

Further, expense control initiatives will likely continue to support the bottom line. Also, the provision requirement should not be as high as it was in the first half of 2016, thanks to the recovery in oil prices.

However, margin pressure will continue to hurt revenues, as the Fed maintained its dovish stance. Further, a substantial rebound in advisory and investment banking fees is not expected.

While it is too early to predict the sector’s overall performance this quarter, per our Earnings Preview report, overall earnings for the Finance sector (of which major banks constitute a large part) are expected to increase 8.5% year over year in third-quarter 2016.

So, it will be interesting to see how major regional banks perform when they announce their results in the coming days. Today, we are discussing four major banking stocks that are scheduled to release their third quarter results tomorrow, before the market opens.

BB&T Corporation (BBT - Free Report) is expected to witness a marginal improvement in the top line in the to-be reported quarter driven by loan growth. Further, given the synergies from acquisitions, expenses are likely to trend lower. However, margin pressure will continue to hurt top-line growth. (Read more: Will BB&T Be Able to Maintain Earnings Streak in Q3?)

The Zacks Consensus Estimate for this Zacks Rank #3 (Hold) bank’s third quarter remained stable at 70 cents over the last 30 days.

BB&T CORP Price and EPS Surprise

 

BB&T CORP Price and EPS Surprise | BB&T CORP Quote

Like all banks, U.S. Bancorp (USB - Free Report) is expected to witness margin pressure in the to-be reported quarter. Further, the company expects expenses to trend higher, while muted loan growth may dampen interest income. Nevertheless, strength in the mortgage banking business will support the top line. (Read more: Will Higher Expenses Hurt U.S. Bancorp Q3 Earnings?)

With a Zacks Rank #4 (Sell) and Earnings ESP of -1.19%, U.S. Bancorp’s chances of beating the Zacks Consensus Estimate are low.

US BANCORP Price and EPS Surprise

 

US BANCORP Price and EPS Surprise | US BANCORP Quote

M&T Bank Corporation (MTB - Free Report) is likely to witness stable net interest income in the to-be reported quarter. Further, driven by improvement in its mortgage banking revenues, we believe fee income is expected to trend higher. However, higher expenses are likely to remain a headwind. (Read more: Will Higher Costs Weigh on M&T Bank Q3 Earnings?)

Notably, analysts don’t seem to be happy with this Zacks Rank #3 bank stock’s performance in the soon-to-be reported quarter. The company witnessed four downward revisions in earnings estimates (versus two upward revisions) over the last 30 days.

M&T BANK CORP Price and EPS Surprise

 

M&T BANK CORP Price and EPS Surprise | M&T BANK CORP Quote

Northern Trust Corporation (NTRS - Free Report) is likely to record modest growth in custody, servicing and management fees. However, the company’s revenues from FX trading are likely to decline, while expenses are expected to trend up. (Read more: Northern Trust Q3 Earnings: What’s in the Cards?)

Activities of Northern Trust during the quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the quarter remained unchanged over the last seven days. Notably, the estimated figure represents year-over-year growth of 12.5%. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

NORTHERN TRUST Price and EPS Surprise

 

NORTHERN TRUST Price and EPS Surprise | NORTHERN TRUST Quote

Stay tuned! Check back on our full write-up on earnings releases of these stocks.

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