Bank Stock Roundup: Enough Positive Surprises In Q2 Despite Weakness, JPM & BAC In Focus

Over the last five trading days, major banks displayed a bearish trend. Though most banks which reported second-quarter 2017 results this week managed to beat estimates, concerns over the underlying weakness shadowed the optimism.

Results demonstrated an upswing in loans and improved margins. However, lower treasury yields curbed the benefits. Additionally, rise in deposit balances and lower provisions driven by reserve releases in the Oil & Gas loan portfolio were impressive.

Investment banking fees were favorable, but fixed income and equity trading slumped during the quarter. Also, higher funding costs and decline in mortgage origination volume were on the downside.

Though the absence of exceptionally high legal expenses was a big support, an overall rise in non-interest expenses owing to high spending on technology and other market development initiatives was an undermining factor.

(Read: Bank Stock Roundup for the week ending Jul 14, 2017)

Important Earnings of the Week

1. Rising interest rates and loan growth drove JPMorgan Chase & Co.’s (JPM - Free Report) second-quarter 2017 earnings of $1.82 per share, which easily surpassed the Zacks Consensus Estimate of $1.57. Also, the figure reflects a 17% rise from the year-ago period. Notably, the results included a legal benefit of $406 million.

Solid loan growth and higher interest rates supported net interest income. Further, investment banking fees recorded a rise. Apart from these, results were supported by a fall in provision for credit losses, mainly driven by reserve releases in the Oil & Gas loan portfolio.

As expected, fixed income and equity trading slumped during the quarter. Also, fall in mortgage banking income, due to higher funding costs and decline in mortgage origination volume, was a headwind. Operating expenses reported a rise during the quarter. (Read more: JPMorgan Q2 Earnings Beat on Loan Growth, Higher Rates)

2. Citigroup Inc. (C - Free Report) delivered a positive earnings surprise of 5.0% in second-quarter 2017, riding on higher revenues. The company’s income from continuing operations per share of $1.27 for the quarter outpaced the Zacks Consensus Estimate of $1.21. Also, earnings compared favorably with the year-ago figure of $1.25 per share.

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Chee Hin Teh 3 years ago Member's comment

Thanks sir