Bank Stock Roundup: Q2 Earnings In Final Stretch; Comerica, SunTrust, Citi In Focus
In the last five trading days, earnings releases were in full swing for banking stocks. Effective cost-control initiatives and absence of high legal expenses helped banks that have reported so far to outpace the respective Zacks Consensus Estimate.
Banks were easily able to surpass estimates owing to downward revisions just before the releases. The concerns that led to the estimate revisions by analysts appear justified, as the overall low interest rate backdrop remained challenging for banks, adversely impacting net interest income. Also, pressure on revenues continued to strain bottom-line growth.
Further, legal issues (though of lesser magnitude) pertaining to business misconducts continued to make headlines over the last five trading sessions. Citigroup Inc. (C - Analyst Report) will soon refund roughly $700 million to nearly 8.8 million customers who were victimized by illegal credit card practices.
On separate note, the bank is shutting down its three-branch Banamex (Banco Nacional de Mexico) USA subsidiary and paying $140 million as fine to end regulatory probes over loopholes in its anti-money laundering program.
Nevertheless, with the upbeat economic activity, consumer and commercial loan demand will continue to trend upward. Also, rumors of first rate hike, slated to occur after almost eight years in September, raised investors’ hopes. However, the euphoria over improved earnings of big banks (as seen in the last to last week’s share price performance) ebbed away, with banking stocks showing modest rise over the last five trading days. (Read the last Bank Stock Roundup for Jul 17, 2015)
Recap of the Week’s Most Important Earnings Releases:
1. Comerica Inc.’s (CMA - Analyst Report) second-quarter 2015 earnings per share of 73 cents were a penny below the Zacks Consensus Estimate. Moreover, the reported figure compared unfavorably with the prior-year quarter earnings of 80 cents per share.
Higher expenses and increased provision for credit losses were the downsides. However, growth in the top line, supported by an increase in net interest as well as non-interest income, was a positive. With growth in loan and deposit balances, the company exhibited a strong capital position in the quarter (read more: Comerica Earnings Lag on High Provisions, Revenues Up Y/Y).
2. SunTrust Banks, Inc.’s (STI - Analyst Report) second-quarter 2015 earnings of 89 cents per share outpaced the Zacks Consensus Estimate of 81 cents. Moreover, the figure came in 10% higher than the prior-year quarter’s adjusted tally.
Better-than-expected results were driven by lower operating expenses and provision for credit losses. Further, growth in loans and deposits as well as improvement in asset quality was impressive. However, fall in revenues exerted strain on the bottom line (read more: SunTrust Beats on Q2 Earnings as Expenses Fall).
3. Regions Financial Corp.’s (RF - Analyst Report) second-quarter 2015 earnings from continuing operations came in at 20 cents per share, in line with the Zacks Consensus Estimate. Moreover, results compared unfavorably with the prior-year quarter earnings of 21 cents per share.
Revenues grew on the back of higher non-interest income. Moreover, increase in loans and deposits were the positives for the quarter. Yet, higher expenses were on the downside (read more: Regions Reports Q2 Earnings as Expected, Revenues Climb).
4. The Bank of New York Mellon Corp.’s (BK - Analyst Report) second-quarter 2015 adjusted earnings per share of 77 cents came well ahead of the Zacks Consensus Estimate of 66 cents, driven by improved top-line growth. Further, the figure compared favorably with the prior-year quarter adjusted earnings of 62 cents.
Higher fee income, mainly led by 44% growth in foreign exchange trading revenues and 32% increase in finance income, primarily drove the improved results. Also, an increase in net interest income, lower operating expenses and a benefit from provision acted as tailwinds (read more: BNY Mellon Q2 Earnings Up on Higher Revenues, Costs Dip).
5. Fifth Third Bancorp’s (FITB - Analyst Report) second-quarter 2015 earnings per share came in at 36 cents, in line with the Zacks Consensus Estimate. However, the reported figure compared unfavorably with the prior-year quarter tally of 49 cents.
Results reflected lower revenues and increase in provisions for loan and lease losses. However, on the positive note, expenses reduced. Further, the quarter witnessed continued growth in loan and deposit balances and exhibited a strong capital position (read more: Fifth Third Posts In-Line Earnings, Revenues Down Y/Y).
Price Performance
Overall, the performance of banking stocks remained muted as the focus, once again, shifted to concerns related to top line pressure. Here is how the seven major stocks performed:
Company |
Last Week |
6 months |
JPM |
0.6% |
24.5% |
BAC |
0.4% |
17.1% |
WFC |
0.5% |
10.7% |
C |
1.9% |
23.3% |
COF |
-0.2% |
18.0% |
USB |
-0.4% |
6.6% |
PNC |
0.2% |
16.0% |
In the last five trading sessions, Citigroup and JPMorgan Chase & Co. (JPM - Analyst Report) were the major gainers, with their shares rising 1.9% and 0.6%, respectively. On the other hand, Capital One Financial Corp. (COF - Analyst Report) and U.S. Bancorp (USB) declined marginally.
Over the last six months, JPMorgan and Citigroup were the top performers, with their shares surging 24.5% and 23.3%, respectively. Further, Capital One and Bank of America Corporation climbed 18% and 17.1%, respectively.
What's Next in the Banking Universe?
Earnings season for banks will be at the tail end in the upcoming week. Among others, Old National Bancorp. (ONB) is scheduled to release results on Jul 27; while both Hudson City Bancorp, Inc. (HCBK - Analyst Report) and Cullen/Frost Bankers, Inc. (CFR - Analyst Report) will report on Jul 29.
Disclosure: None.