6 Major Bank Earnings Making Headlines

Posted:10/17/12
By:Freda Ding

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It’s earnings season! A common trend so far is the regained confidence in the capital markets. Companies are starting to take more risk and issuing new securities. Banks have continued to build capital and liquidity positions. In addition, the housing recovery has made a real impression for financial services with mortgage refinancing taking off.

Here’s what you need to know:

The Goldman Sachs Group
The profitable company announced it’s raising dividends. Revenues this quarter were 8.35 billion, more than double Q3 last year. But Goldman (GS) beating estimates is almost too easy. Remember that outlier loss in income last year? It looks like the firm’s aggressive efforts to cut expenses are paying off despite the low hurdle. Revenue from investment banking underwriting fees were up 49% despite a lag in advisory services.

Citigroup
Citi (C) also beat earnings (10 cents per share) excluding losses in its divestiture of its Morgan Stanley Smith Barney stake. Analysts are bullish on the stock. Loan demand has been high in Latin America. This was most notably offset by decreased profits in Asia consumer banking. This is certainly an interesting trajectory from Sandy Weill‘s Too Big To Fail Days. It’s been announced that CEO Vikram Pandit will be stepping down, replaced by Michael Corbat who was in charge of selling Citi’s junk holdings. COO John Havens is also resigning.

Wells Fargo & Company
The firm originated $139 billion in mortgage loans, an increase from $89 billion last year. Net income rose 23% to $4.7 billion on the rising mortgage business. Wells Fargo (WFC) posted record profits but shares were slipping last Friday. Deposits and loans are growing across business segments. However, net interest margins, which determines the bank’s profits, are compressed.

JPMorgan Chase & Co.
The nation’s largest bank (JPM) experienced similar circumstances, increasing net income 34%. But markets haven’t jumped on the stock just yet. CEO Jamie Dimon has noted mortgage volume increases thanks to low interest rates and HARP (Home Affordable Refinance Programs) but profit margins are getting smaller.

Keep your eyes peeled as other banks roll out earnings during the week. Morgan Stanley (MS) is facing a discrimination lawsuit by ACLU but is trading up to earnings. Bank of America (BAC) results are also expected later in the week.

Quick rating comparison:

1. The Goldman Sachs Group, Inc. (GS, Earnings, Analysts, Financials): Provides investment banking, securities, and investment management services to corporations, financial institutions, governments, and high-net-worth individuals worldwide. Market cap at $59.69B, most recent closing price at $124.50.

2. Citigroup, Inc. (C, Earnings, Analysts, Financials): Provides consumers, corporations, governments, and institutions with a range of financial products and services. Market cap at $107.5B, most recent closing price at $36.66.

3. Wells Fargo & Company (WFC, Earnings, Analysts, Financials): Provides retail, commercial, and corporate banking services primarily in the United States. Market cap at $179.07B, most recent closing price at $33.90.

4. JPMorgan Chase & Co. (JPM, Earnings, Analysts, Financials): Provides various financial services worldwide. Market cap at $160.99B, most recent closing price at $42.38.

5. Morgan Stanley (MS, Earnings, Analysts, Financials): Provides various financial products and services to corporations, governments, financial institutions, and individuals worldwide. Market cap at $35.18B, most recent closing price at $17.75.

6. Bank of America Corporation (BAC, Earnings, Analysts, Financials): Provides banking and financial services to individuals, small- and middle-market businesses, corporations, and governments primarily in the United States and internationally. Market cap at $101.73B, most recent closing price at $9.44.