Back to top

Image: Bigstock

Big Banks Q2 Earnings Scorecard: What Investors Need to Know

Read MoreHide Full Article

The four big banks — JPMorgan (JPM - Free Report) , Citigroup (C - Free Report) , Bank of America (BAC - Free Report) and Wells Fargo (WFC - Free Report) — released second-quarter results last week.  In this article, we look into the results of these Wall Street giants.

These banks reported a decent increase in earnings on a year-over-year basis. All managed to beat the Zacks Consensus Estimate. Nonetheless, only two of these rallied following the earnings release as disappointing outlook weighed on investors’ mind.

One common theme that favorably impacted big banks’ second-quarter results was strength in consumer lending business, which was driven by loan growth, relatively higher rates and efforts by banks to upgrade technology and expand in new regions by opening branches and ATMs.

JPMorgan

Earnings & Revenues: The company reported second-quarter adjusted earnings of $2.59 per share, topping the Zacks Consensus Estimate of $2.50 and the year-ago figure of $2.29. This was primarily driven by higher mortgage banking fees, decent loan growth and rise in card income.

Total revenues of the New York-based largest U.S. bank were $28.8 billion, up 4% year over year. Also, the figure marginally surpassed the Zacks Consensus Estimate of $28.4 billion.

Loan & Deposit Balance: As of Jun 30, 2019, loans totaled $956.9 billion, up 1% year over year. Likewise, deposits grew 5% to $1.52 trillion as of the same date.

Credit Quality: In the second quarter, provision for credit losses was $1.1 billion, down 5% from the prior-year quarter. Also, non-performing assets declined 9% to $5.3 billion. However, net charge-offs increased 12% to $1.4 billion.

Guidance: JPMorgan lowered in net interest income (NII) guidance for 2019. The company now anticipates NII to be around $57.5 billion, down from prior outlook of more than $58 billion. The change is based on a number of factors, including lower long end rates and expectations of up to three rate cuts this year.

Share Price Impact: Shares of this Zacks Rank #3 (Hold) company rose just 0.1% as disappointing NII outlook weighed on investors’ mind.

Citigroup

Earnings & Revenues: The company’s second-quarter adjusted earnings per share of $1.83 beat the Zacks Consensus Estimate of $1.78, and was above the year-ago quarter’s earnings of $1.62. The outperformance was driven by higher revenues (riding on consumer banking strength), prudent cost management and loan growth.

Total revenues at the New York-based big bank were $18.8 billion, up 2% year over year and beat the consensus estimate of $18.3 billion.

Loan & Deposit Balance:  As of Jun 30, 2019, total loans grew 3% year over year to $688.7 billion. Deposits were up 5% to $1.05 trillion.

Credit Quality: Citigroup’s costs of credit for the June-ended quarter were up 16% year over year to $2.1 billion. The upswing largely underlines elevated net credit losses of $2 billion and a credit reserve build of $111 million, and provision for benefits and claims of $19 million.

However, total non-accrual assets fell 9% year over year to $3.7 billion for this Zacks Rank #3 company.

Guidance: For 2019, Citigroup expects modest year-over-year revenue growth, attributed to continued rise in net interest revenues and more stable trends in non-interest revenues.

Share Price Impact: The company's shares declined 0.6% following the release of second-quarter results.

Bank of America

Earnings & Revenues: The company’s earnings per share of 74 cents surpassed the Zacks Consensus Estimate of 70 cents and the year-ago profit of 63 cents, driven by loan growth and higher equity issuances.

The Charlotte, NC-based bank’s total revenues were $23.1 billion, up 2% year over year and marginally beat the Zacks Consensus Estimate of $23 billion.

Loan & Deposit Balance: As of Jun 30, 2019, net loans were $954.3 billion, up 3% year over year. Also, deposits grew 5% to $1.38 trillion as of the same date.

Credit Quality: Provision for credit losses for this Zacks Rank #3 company increased 4% on a year-over-year basis to $857 million. However, net charge-offs declined 11% to $991 million. Further, as of Jun 30, 2019, ratio of non-performing assets ratio was 0.47%, down 19 basis points.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Guidance: For 2019, Bank of America anticipates NII to be up nearly 2% (down from growth of 3% as previously guided), based on the assumption of flattish yield curve, two rate cuts this year, and modest loan and deposit growth.

Additionally, 2019 operating expenses are expected to be slightly lower than reclassified 2018 level (on adjusted basis).

Share Price Impact: The company's shares rose 1.7% following the earnings release as prudent cost management despite new branch openings and technology investments cheered investors.

Wells Fargo

Earnings & Revenues: The company’s second-quarter earnings of $1.30 per share beat the Zacks Consensus Estimate of $1.16 and came in higher than the prior-year quarter adjusted earnings of $1.08. The bottom-line improvement was driven by the company’s cost management efforts, and loan and deposit growth.

Total revenues at this San Francisco-based bank were $21.6 billion, on par with the year-ago quarter level. Further, the figure beat the Zacks Consensus Estimate of $20.8 billion.

Loan & Deposit Balance: As of Jun 30, 2019, total loans were $949.9 billion, up 1% from the prior-year quarter. Total deposits were $1.29 trillion, up 2%.

Credit Quality: Provision for credit losses for this Zacks rank #3 stock was $503 million, 11% higher from the prior-year quarter. Net charge-offs were $653 million, up 8.5%.

However, allowance for credit losses, including the allowance for unfunded commitments, totaled $10.6 billion as of Jun 30, 2019, down 4.5% year over year.

Guidance: For 2019, management expects NII to be down 2-5% year over year due to a flatter curve and tightening loan spreads.

Share Price Impact: Disappointing NII guidance hurt investors’ sentiments, leading to 3.2% decline in the company’s share price following the announcement of second-quarter results.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>