BANK STOCKS POSTMORTEM

for
JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Co (NYSE:WFC), and Citigroup Inc (NYSE:C)

by Ian Harvey

July 14, 2017

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Here is a quick overview of the above stocks after reporting earnings Friday morning, July 14, 2017..................

JPMorgan Chase & Co. (NYSE:JPM)

JPMorgan Chase just reported second quarter earnings, posting “a record breaking quarter.”

However, the stock was down 1.9% at one stage to trade at $91.29; but finished the day at $92.25, down 0.91%.

The report………..

Net income of $7 billion, or $1.82 per share; analysts had forecast EPS of $1.58 per share, according to Bloomberg.

Reported revenue of was $25.5 billion, with net interest income at $12.5 billion up 8%; due to rising rates and loan growth.

The bank's consumer and community banking unit posted lower profits. CCB net income was down 16% on the same period last year. Increased interest income was offset by higher Card new account origination costs, and expenses were driven higher by auto lease appreciation costs and marketing spend.

Corporate and investment bank net income increased 7% to $2.7 billion. Global banking revenues increased 17% to $3.1 billion, offsetting an 11% decline in markets and investor services revenues to $5.8 billion. Fixed income trading revenues dropped sharply, down 19% to $3.2 billion.

Commercial banking delivered record revenues and profits, with revenue of $2.1 billion and net income of $902 million.

Asset and wealth management also delivered record profits, with net income of $624 million in net income. The bank also posted record assets under management at $1.9 trillion, and record client assets of $2.6 trillion. 

Jamie Dimon, Chairman and CEO of JPMorgan Chase & Co., had this to say;

"Loans and deposits continue to grow strongly, and card sales and merchant processing volumes were up double digits, reflecting our consistent investment in the business,"

"In the Corporate & Investment Bank, we maintained our leadership in Banking, while Markets revenue was down amid lower volatility and client activity.”

“Commercial Banking delivered record results this quarter with broad strength across products and markets.”

"And in Asset & Wealth Management, the performance also was excellent with record net income and AUM.”

End Result……….

While the company's earnings were better than expected, the banking giant also lowered its forecast for lending income.

JPMorgan stock has had a sound year, shooting to an all-time high of $94.51 on July 6, and tacking on 47% year-over-year.

The Trade……..

Hold steady until next week. The option dropped to $0.91 but recovered to end the day at $1.43 (day high of $1.50) –down $0.57 from original entry price.

Wells Fargo & Co (NYSE:WFC)

Wells Fargo stock was down 2.3% to trade at $54.31, after the company's second-quarter sales fell short of expectations. WFC managed to close the day down 1.10% at $54.99.

As well, Wells Fargo yesterday was mentioned by Fed Chair Janet Yellen, as the central banker told the Senate Banking Committee that she's "prepared to take enforcement actions" against Wells Fargo directors if that's where the investigation into fake accounts leads.

The report………..

Wells Fargo reported net income of $5.8 billion, up 5% compared to a year ago, or $1.07 per share, an increase of 6%. That beat the consensus of $1.01.

Revenue of $22.2 billion was unchanged compared to a year earlier, below the consensus estimate of $22.5 billion. Revenues from mortgage lending were down during the quarter.

Chief Executive Tim Sloan acknowledged the bank's recent scandals in a release, saying "We continued to make progress this quarter in our efforts to rebuild trust and build a better Wells Fargo and, while there is still more work ahead of us, we are on the right track and I am confident about our future."

End Result……….

WFC shares have struggled to stay above breakeven in 2017, although its 80-week moving average has emerged as support.

The Trade……..

Again hold steady as more action is likely to affect WFC in the near future. Earlier the trade was up $1.88 (entry price was $1.20), but alluded our sell price of $2.20; down to $1.30 at closing (still up a little).

Citigroup Inc (NYSE:C)

Citigroup Inc reported a quarterly profit that beat analysts' estimates as trading revenue held up better than the company's forecast and loans grew. However,

Further, Citigroup CFO John Gerspach touted an "outstanding performance in investment banking this quarter." Shares of Citigroup are up nearly 12% year-to-date, and recently touched an eight-year high of $68.91 on July 3. 

Citigroup ended the day at $66.72, down $0.30, or 0.45%

The report………..

Citigroup Inc. reported net income of $3.9 billion, or $1.28 a share, in the second quarter, down from $4.0 billion, or $1.24 a share, in the year-earlier period.

Revenue came to $17.9 billion, up from $17.5 billion. The consensus was for EPS of $1.21 and revenue of $17.4 billion.

"During the quarter, we saw continued momentum in our businesses, with loan and revenue growth across both sides of the house," Chief Executive Michael Corbat said in a statement.

The bank said its consumer banking business grew revenue by 5% to $4.9 billion as higher revenue from its card business offset lower revenue in retail banking, driven by lower mortgage revenue.

Trading revenue fell 6% as fixed income fell 6%, while equity trading rose 11%.

Investment banking revenue rose 22%, due to strong equity underwriting and advisory and strength in debt underwriting.

End Result……….

Citigroup's shares were nearly flat in premarket trading. Up to Thursday's close, the stock had gained 12.8% this year.

The shares have climbed toward their tangible book value since mid-April largely in anticipation of the company being allowed by the Federal Reserve to use excess capital to buy back stock.

Citigroup got the go-ahead on June to repurchase up to $15.6 billion of common stock over the next year - nearly twice as much as the year before - as well as double its quarterly dividend to 32 cents per share, bringing total payouts to $18.9 billion for the period.

The Trade……..

Citigroup should climb again based on its report – so hold on. The last trade was $1.69 – down slightly from our entry price of $1.90.


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