Mixed Outlooks For Four Big Banks Ahead Of Earnings

The first-quarter earnings season is set to kick off next week with the largest banks in the United States set to report. JPMorgan Chase (JPM) and Wells Fargo (WFC) are set to report on Wednesday, April 14, and Bank of America (BAC) and Citigroup (C) are set to report on Thursday, April 15.

Bank stocks have performed extremely well over the last few months as interest rates have been rising. When interest rates increase, bank margins improve as the gap between the interest received on loans increases more than the interest paid out on deposits. The rate on 10-year Treasuries jumped above 1.0% at the beginning of the year and continued to climb in the first quarter. The 10-year treasury rate is a key benchmark for loan rates.

With the rising interest rates boosting investor confidence in banks, the stocks of the four banks listed above have all seen significant jumps. From the beginning of February through April 6, the S&P 500 has increased approximately 10%. During that same time period Bank of America is up 34.5% and Wells Fargo is up 33.8%. Citigroup is up 25.2% and JPMorgan lags the others, but still gained 19.3%.

All four weekly charts show that the stocks are in overbought territory based on the 10-week RSI and the weekly stochastic indicators. Rather than show you all four charts, the chart for Bank of America is below. It is the one with the highest RSI of the four.

BAC Tickeron TM.png

Bank of America’s stochastic indicators are also higher than the other three, but all four have readings above 80. All four stocks are also significantly above their 52-week moving averages as well.

Earnings are Expected to Improve Greatly Versus Last Year

Looking at the EPS estimates for each of the four companies, all four are expected to see great improvements in their earnings compared to Q1 of 2020. I put together the following table to show each company’s EPS estimate, the results from Q4 2020, and the results from Q1 2020. What we see is that Citigroup is the only one that is expected to see better earnings for Q1 than they did in Q4. The other three are expected to see slight declines on a quarter to quarter basis.

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