U.S. bank earnings: low rates, repo turmoil and trade war to hurt

Beacon Financial

10/10/2019 12:40

By Noor Zainab Hussain
    ** Big U.S. banks will report weak Q3 earnings, hit by a
fall in interest rates and sluggish loan growth, according to
J.P. Morgan analysts 
    ** The earnings reports next week will also show the impact
of the recent turmoil in the repo and equity markets 
        
    THE BAD 
    ** Increased repo market volatility at quarter end as Fed
injected money to ease liquidity
    ** Uncertainty due to the prolonged U.S.-China trade war
hitting trading
    ** Declines in interest income following the two interest
rate cuts by the Fed 
    ** Slip in total investment banking fees, led by weakness in
M&A advisory

    THE GOOD
    ** EPS growth to be driven by buybacks and cost cuts 
    ** Growth in Treasury securities at large banks should
temper impact from weak C&I loan growth
    ** WFC will benefit from strong mortgage banking and surge
in origination volume
    ** JPM analysts expect a sharp rise in debt issuance and
slight uptick in equity underwriting
    
    EXPECTATIONS
    ** Earnings at Bank of America Corp  BAC.N  - the
second-largest U.S. lender - to benefit from cost cuts, as well
as loosening of regulations 
    ** Citigroup  C.N  to be hurt by geopolitical risk and
material economic downturn outside of the U.S, especially in
emerging markets
    ** JPM expects trust banks, mainly Bank of NY Mellon Corp
 BK.N  and State Street  STT.N , to hold up relatively better,
led by growth in non-operational deposits, reverse repos and
decent equity markets 
    
    
 DATE      BANK             RIC        REFINITIV  Q3 2018
                                       Q3 EPS     
                                       ESTIMATES  
 Oct. 15   JPMorgan Chase    JPM.N        $2.46    $2.34 
           & Co                                   
 Oct. 15   Goldman Sachs     GS.N         $5.01     $6.28
           Group Inc                              
 Oct. 15   Citigroup Inc     C.N           $1.95    $1.73
 Oct. 15   Wells Fargo &     WFC.N        $1.14    $1.13 
           Co                                     
 Oct. 16   Bank of America   BAC.N        $0.52    $0.66 
           Corp                                   
 Oct. 17   Morgan Stanley    MS.N         $1.13    $1.17 
 
    
    
    
    
    

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Wells Fargo and JPM come out on top after messy Q3    https://tmsnrt.rs/2OH22WZ
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Noor Zainab Hussain in Bengaluru)
 ((noor.hussain@thomsonreuters.com; Within UK +44 20 7542 1810;
Outside UK +91 80 6182 2663 or +91 80 3796 2663))