Market Reaction To Bank Earnings Is Mixed, JPMorgan Analysts Project Further Decline In Net Interest Income
Benzinga
Published Apr 17, 2024 21:15
Updated Apr 17, 2024 22:41
Market Reaction To Bank Earnings Is Mixed, JPMorgan Analysts Project Further Decline In Net Interest Income
Benzinga - by Surbhi Jain, .
As the U.S. financial sector grapples with recent earnings releases, investor reactions have been mixed.
Some stocks are witnessing declines. Others are posting gains. See below.
Banks Q1 Earnings Reports And Market Reactions, So Far
| Company | Ticker | Mkt Cap ($ mn) | Price ($) | Rating | JPMorgan Price Target | End Date | Q1 Earnings Date | EPS | Revenue | Stock Reaction (since earnings) as of April 18, 2:40 PM ET |
| Citigroup Inc. | C | 119,590.80 | 62.84 | N | 64 | Dec-24 | Apr 12 | Beat | Beat | -4.46% |
| Wells Fargo | WFC | 206,396.90 | 57.35 | N | 59 | Dec-24 | Apr 12 | Beat | Beat | -0.11% |
| Bank of America | BAC | 294,502.20 | 37.3 | OW | 39.5 | Dec-24 | Apr 16 | Beat | Beat | 2.43% |
| PNC Financial | PNC | 63,173.54 | 157.54 | OW | 163.5 | Dec-24 | Apr 16 | Beat | Miss | -0.79% |
| Citizens Financial Group | CFG | 16,343.29 | 35.04 | N | 36.5 | Dec-24 | Apr 17 | Beat | Miss | 2.76% |
| U.S. Bancorp | USB | 67,352.34 | 43.23 | OW | 45 | Dec-24 | Apr 17 | Beat | Miss | -3% |
| Fifth Third Bancorp | FITB | 24,506.88 | 35.98 | N | 37.5 | Dec-24 | Apr 19 | |||
| Regions Financial | RF | 18,812.64 | 20.36 | N | 21 | Dec-24 | Apr 19 | |||
| Truist Financial Corp | TFC | 50,535.52 | 37.89 | N | 39.5 | Dec-24 | Apr 22 |
Citigroup Inc (NYSE:C) and Wells Fargo (NYSE:WFC) reported earnings on April 12. Both firms beat EPS and revenue estimates.
Citi stock is down 4.46% while Wells Fargo’s stock is down 0.11% since April 12.
Bank of America (NYSE:BAC) reported a beat on both metrics; PNC Financial (NYSE:PNC) fell short of consensus estimates on revenue. BAC stock is up 2.43% since then, but PNC is down 0.79%.
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Then there’s Citizens Financial Group (NYSE:CFG). The firm reported a beat on EPS but a miss on revenue on Wednesday. Citizens stock was trading up 2.76% during day trading on Wednesday by 2.40 PM ET.
U.S. Bancorp (NYSE:USB) reported a beat on EPS, but a miss on revenue. The firm’s stock was trading down by more than 3.3% at last check Wednesday, trading at $39.62 a share.
Macroeconomic Concerns /h2 With the Fed delaying the rate cut decision, market sentiment towards banks and bank stocks appears muted, despite earnings beats.
The SPDR Financial Select Sector ETF (NYSE:XLF) has experienced a 1.17% decline since then (April 12), reflecting the market’s subdued sentiment.
Regional banks, represented by the SPDR S&P Regional Banking ETF (NYSE:KRE), have also dipped by 1.66% over these past 5 days.
Upcoming earnings reports include:
- Fifth Third Bancorp (NYSE:FITB), Friday, April 19.
- Regions Financial (NYSE:RF) also April 19
- Truist Financial Corp (NYSE:TFC), Monday, April 22
What Lies Ahead For Banks In 2024?/h2 JPMorgan Chase anticipates a challenging quarter for banks. The firm’s analysts project a further decline in net interest income by approximately 3.6%; weak loan performance is expected to decrease by 0.8% quarter-over-quarter.
Moving forward, banks’ ability to reduce deposit costs in response to potential rate cuts by the Federal Reserve, will be critical, notes JPMorgan, drawing attention to the ongoing competition posed by U.S. money market mutual funds.
Particularly during periods of rate adjustments, these tend to influence banks’ deposit pricing strategies.
Moreover, JPMorgan notes that retail segment deposits are expected to exhibit lower betas to rate cuts, with retail deposits comprising a significant portion of banks’ total deposits.
Notably, Citizens, Regions, Wells Fargo, and Truist have relatively higher shares of retail deposits, albeit with nuances in their compositions.
Citi stands out with a smaller proportion of U.S. retail deposits but holds a larger volume of overseas deposits, characterized by lower deposit betas compared to the US market.
More on this aspect, covered here: Big Banks To Report Q1 Earnings: Analyst Prefers Bank Of America, ‘Citi Likely To Lag’
For investors, the key lies in selective stock picking, favoring well-capitalized banks with robust reserves and reduced exposure to commercial real estate. The upcoming reports will provide valuable cues for investors navigating the financial landscape in the months ahead.
Read Next: Financial Stocks Fall After Earnings, Major Banks Notch 4-Day Losing Streak: Regional Banks Hit Lowest Level Since Late 2023
Image: Midjourney
Latest Ratings for WFC
| Jan 2022 | Raymond James | Maintains | Outperform | |
| Jan 2022 | Piper Sandler | Upgrades | Neutral | Overweight |
| Jan 2022 | JP Morgan | Maintains | Neutral |
View the Latest Analyst Ratings
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