Tag: Citigroup

Big Banks Fail to Impress Despite Earnings Beat

Big Banks Fail to Impress Despite Earnings Beat

Shares of JPMorgan Chase & Co. (JPM ), Citigroup Inc. (C) and Wells Fargo Corp. (WFC) all saw a significant dip Friday despite posting earnings results that beat consensus estimates for both top and bottom line numbers.
In Q1, analysts expected the S&P 500 to show profit gains of 17% year-over-year (YOY), while banks were projected to jump 28%.
(See also: 10 Financial Stocks Poised to Outperform.)
The sell-off suggests that banks failed to meet lofty targets demonstrated by investors confidence in financials over the past five years, driving the sector up 90% over that time and accelerating gains in the past year.
Rising rates, which were expected to provide a strong boost to banks, worked to increase interest income 10% for JPM and C in Q1, yet interest expenses were up in the 50% range.
Despite historically low levels of unemployment and a strong economy, loan growth was lackluster, as JPM’s lending business slumped 0.2% from the previous three quarters, WFC loans slumped 1% and Citigroup’s lending gained just 1%, attributed to an initiative to expand its struggling credit card business.
Higher rates failed to translate into a a jump in lending profits, with net interest margins remaining in the 3% range.
The story suggests that while interest rates were at historic lows, individuals took advantage and refinanced, perhaps borrowing even more than they needed.
This lull in loan demand explains a weakness across the board for the banks’ mortgage businesses in Q1.
The bank posted EPS of $1.12 on revenue of $21.9 billion, reflecting a dip from the year-ago period of $22.3 billion in sales, yet better than analysts’ expectations.

Doubts over U.S. bank capital payouts may cloud strong earnings

Doubts over U.S. bank capital payouts may cloud strong earnings

Eight years of U.S. economic growth have been a tailwind for banks, but the Fed has since 2013 made its stress test scenarios more challenging each year.
After first writing down deferred tax assets to account for a lower corporate rate, banks now face being prevented from carrying back losses in stress testing to past profitable quarters to benefit from tax rebates.
First-quarter net income for JPMorgan, Wells Fargo and Citigroup likely rose 34 percent, 5 percent and 12 percent, respectively, according to analysts surveyed by Thomson Reuters I/B/E/S.
Banks will likely see bigger reductions in projected capital levels in this year’s exam, a banking industry economist said.
In a March 2 supervisory letter, the Fed cited elimination of carrybacks as one reason the tax law could have “material” negative effects on some banks in this year’s stress test.
Goldman Sachs said in January that a key measure of capital shrank by 0.7 percentage points to 10.7 percent at Dec. 31 because of one-time tax charges, which included marking down deferred tax assets, such as credits against future taxes known as loss carryforwards.
In stress tests before the tax law change, carrybacks from losses could support capital levels and improve the odds of bigger approved buybacks.
To be sure, executives could flag offsets to those effects.
Goldman, like other banks with profits kept overseas, picked up deferred tax liabilities for so-called repatriation taxes it booked in the fourth quarter but had not yet paid.
JPMorgan and Citigroup are two big card issuers but have not discussed their outlook for payouts in light of the letter.

Global markets gain after strong Wall Street week

Global markets gain after strong Wall Street week

BEIJING – Most global stock markets rose Monday following a strong week on Wall Street despite jitters about the status of Spain’s Catalonia region and tensions over North Korea.
KEEPING SCORE: Germany’s DAX rose 0.2 percent to 12,985.31 and France’s CAC-40 advanced 0.2 percent to 5,369.70. London’s FTSE 100 was unchanged at 7,518.62. On Friday, the CAC shed 0.4 percent and the DAX lost 0.1 percent while the FTSE 100 rose 0.2 percent.
ASIA’S DAY: The Shanghai Composite Index rose 0.8 percent to 3,374.38 and Sydney’s S&P ASX 200 gained 0.5 percent to 5,739.30.
Attention centered on government jobs data that were much weaker than expected. The S&P and the Dow, coming off a record high, lost 0.1 percent while the Nasdaq composite added 0.1 percent.
The region’s president has pledged to push ahead for independence following an Oct. 1 referendum.
The contract fell $1.50 the previous session to close at $49.29. It dropped 38 cents the previous day to $55.62.