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Bank Stock Roundup: Q4 Earnings in Full Swing; RF, CMA, COF Beat Estimates

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Despite a lower interest rate environment, banks that announced fourth-quarter 2019 results over the last four trading days reported decent numbers. This was largely driven by strong fee income growth, which was backed by improvement in capital markets revenues, rise in mortgage banking fees and resilient consumer banking.

Further, modest loan growth (mainly attributable to consumer and real estate loan portfolios) and rise in deposit balances acted as a catalyst, while net interest margin mostly contracted. Rise in operating expenses, mainly owing to high spending on technology and personnel, and business restructuring initiatives, was a headwind. Also, provisions for credit losses recorded a rise.

Nonetheless, guidance offered by banks reflect continued pressure on margins while marginal rise in loan demand is expected to offer support to net interest income. Moreover, banks’ efforts to diversify revenues and restructuring initiatives undertaken over the past years are likely to aid profitability in 2020.


 

(Read: Bank Stock Roundup for the Week Ending Jan 17, 2020)

Important Earnings of the Week

1. Regions Financial’s (RF - Free Report) fourth-quarter 2019 adjusted earnings of 40 cents per share surpassed the Zacks Consensus Estimate of 39 cents. Moreover, the figure reflects 5.3% rise year over year. Results benefited from an improvement in revenues. However, higher expenses and rise in provisions hurt results to some extent. (Read more: Regions Financial Q4 Earnings Beat Estimates, Costs Up)

2. Comerica (CMA - Free Report) delivered positive earnings surprise of 6.3% in fourth-quarter 2019. Earnings per share of $1.85 surpassed the Zacks Consensus Estimate of $1.74. Earnings, however, came in lower than the prior-year quarter figure of $1.95. Results reflect higher non-interest income and fall in provisions. However, decline in loan balance, lower net interest income and rise in expenses were the undermining factors. (Read more: Comerica Q4 Earnings Beat Estimates, Revenues Down Y/Y)

3. Fifth Third Bancorp (FITB - Free Report) reported fourth-quarter 2019 adjusted earnings per share of 68 cents, lagging the Zacks Consensus Estimate of 73 cents. Including certain one-time items, the bottom line came in at 96 cents, up 50% year over year. Higher expenses and provisions were the key undermining factors. However, increase in revenues, aided by higher interest income and fee income, was a positive factor. (Read more: Fifth Third Q4 Earnings Miss Estimates, Costs Rise)

4. Capital One’s (COF - Free Report) fourth-quarter adjusted earnings of $2.49 per share easily surpassed the Zacks Consensus Estimate of $2.38. Also, it jumped 33% year over year. Results reflect rise in net revenues, higher loan and deposit balances, and strength in card business. However, a rise in credit cost and higher operating expenses were the undermining factors. (Red more: Capital One Stock Up 1% on Q4 Earnings & Revenue Beat)

5. KeyCorp’s (KEY - Free Report) fourth-quarter 2019 adjusted earnings of 48 cents per share were in line the Zacks Consensus Estimate. Also, the figure was flat year over year. Results benefited from slight improvement in non-interest income, loan growth and lower operating expenses. However, lower net interest income and significantly higher provisions were the undermining factors. (Read more: KeyCorp's Q4 Earnings Meet Estimates, Expenses Decline)

Price Performance

Here is how the seven major stocks performed:
 

Company

Last Week

6 months

JPM

-1.2%

19.0%

BAC

-1.7%

14.2%

WFC

-2.0%

4.3%

C

-1.6%

12.5%

COF

1.8%

13.4%

USB

-0.8%

-0.6%

PNC

-0.4%

10.3%


Over the last four trading sessions, Capital One was the major gainer, with its shares rallying 1.8%. On the other hand, shares of Wells Fargo and Bank of America declined 2% and 1.7%, respectively.

In the past six months, shares of JPMorgan and Bank of America have jumped 19% and 14.2%, respectively. Also, shares of Capital One have appreciated 13.4%.

What’s Next?

Earnings will continue to be in focus in the coming week. Some of the banks slated to announce results are TCF Financial (TCF - Free Report) and Bank of Hawaii on Jan 27, and Prosperity Bancshares, Inc. on Jan 29. Additionally, Truist Financial Corporation (TFC - Free Report) along with Hilltop Holdings and Valley National Bancorp will come out with the quarterly numbers on Jan 30.

Other than earnings releases, investors will keep an eye on the Federal Reserve’s FOMC meeting scheduled on Jan 28 and Jan 29.

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