Rating the Big Players: A Financial Services Earnings Report Breakdown

Rating the Big Players: A Financial Services Earnings Report Breakdown

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Financial services firms like Goldman Sachs, Barclays and Morgan Stanley usually go about rating other companies, but this week they are under the magnifying glass as the fourth quarter earnings of financial institutions are due to be released. I analyzed 7 popular financial institutions on our handy dandy Kapitall playground to gain a better perspective on their performance over the past year, and also looked at quarter three filings with the Securities and Exchange Commission (SEC). Goldman Sachs and JP Morgan are the first two of the bunch to have submitted their fourth quarter reports and I have included some important details from there.

The companies from left to right are Goldman Sachs (GS), Morgan Stanley (MS), Bank of America (BAC), JP Morgan Chase (JPM), Citigroup (C), Nomura (NMR) and Barclays (BCS). The interactive chart below shows monthly stock returns, that is change in stock prices, for these firms.

 

This chart shows quarterly revenues for the same firms up to quarter 3 of 2012.

 

The following chart compares Goldman Sachs and Morgan Stanley with the S&P 500 index. The first two are representative of the general trend in financial institutions. Indices like the Russell 1000 for financial serevices also follow a similar pattern, with a minimum point around the middle of 2012 and then rising prices after that, while the S&P 500 trend line is relatively flat. As we can see, the banks finished up higher than the S&P 500 index.

SEC Filings, Q3
At the 3 months ended 30 sept 2012, Morgan Stanley reported a total revenue from "investment banking" of $1,152 million. Net revenues, which adds revenues from further activities, was over $5 billion. But made a net loss of $1.023 billion, giving a loss per share of $0.55 (negative EPS). But at the same point in 2011 they made a profit of over $2 billion. In quarter 2 of 2012 earnings per share (EPS) was $0.30. (see their filing here). We are still waiting for Morgan Stanley's Q4 earnings results.

Goldman  did better in quarter 3 2012 than Morgan Stanley. They had a basic EPS of $2.95 and dividends of $0.46. Citigroup dividend was $0.01, with 15 cents of EPS. Bank of America was slightly disappointing with $0 EPS for Q3.

Q4 filings by Goldman Sachs and JP Morgan released Wednesday

Goldman Sachs and JP Morgan released form 8-K Wednesday Jan 16th on SEC's EDGAR where all companies' financial reports are publicly available.

The quarterly reports (10-q) for GS is still being "furnished," but the 8-k gives some quick facts and figures for the year's earnings. GS net earnings for 2012 was $7.48 billion. Diluted EPS was an impressive $14.13, up from $4.51 last year. A Return on Capital (ROE) of 10.7% (view GS 8-k here)

GS investment banking division had a net revenue of $4.93 billion for the full year and $1.41 for the fourth quarter only, up 64% from Q4, 2011.

JP Morgan's fourth quarter net income is $5.7 billion with an EPS of $1.39 adn ROE 11%. Total year 2012 net income $21.3 billion and EPS $5.20. Their consumer and community banking division registered net profits of $2 billion in the fourth quarter, after a loss in the third. Corporate and investment banking division also made net profits of $2 billion in the fourth quarter. For the full year 2012 JP Morgan has maintained its number 1 position for global Investment Banking (IB) fees, with a share of 7.6%, since last year when it was also ranked first with a share of 8.1%

However, JPM's net interest margin, which is a profitability metric for financial institutions, has been falling. In Q4 of 2011, the NIM was 2.70% and a year later it is down to 2.40%. Since investors responded negatively to Well's Fargo's NIM drop from 3.89% in Q4 2011 to 3.56% in Q4 2012, even though their total earnings were high, we may expect to see a similar pattern in JPM stocks. But it is probably wise not to react so rashly to a single metric when other indicators show that the company is doing well.

Finally, we have our average analyst recommendations for these firms:

 

Business Ideas

Here's more data on the companies mentioned in this article. Use the links and tools to dig further. (You can also start a free practice portfolio on Kapitall to test your investing ideas.)

Overall, the financial sector has been picking up in the last two quarters of 2012. What do you predict for these firms?

 

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 $63.72B, most recent closing price at $135.59.
 

 

2. Morgan Stanley (MS, Earnings, Analysts, Financials): Provides various financial products and services to corporations, governments, financial institutions, and individuals worldwide. Market cap at $40.47B, most recent closing price at $20.43.
 

 

3. 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 $124.49B, most recent closing price at $11.55.
 

 

4. JPMorgan Chase & Co. (JPM, Earnings, Analysts, Financials): Provides various financial services worldwide. Market cap at $176.19B, most recent closing price at $46.35.
 

 

5. Citigroup, Inc. (C, Earnings, Analysts, Financials): Provides consumers, corporations, governments, and institutions with a range of financial products and services. Market cap at $124.84B, most recent closing price at $42.57.
 

 

6. Nomura Holdings, Inc. (NMR, Earnings, Analysts, Financials): Provides financial services in Japan and internationally. Market cap at $21.29B, most recent closing price at $5.57.
 

 

7. Barclays PLC (BCS, Earnings, Analysts, Financials): Provides various financial products and services in Europe, the United States, Africa, and Asia. Market cap at $58.37B, most recent closing price at $19.07.
 

 

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One Response to “Rating the Big Players: A Financial Services Earnings Report Breakdown”

  1. Read More says:

    Wow. It's so fantastic breakdown.

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