Tag: Wells Fargo

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.

Retirement planning: Millennial, Baby Boomer, or GenX, here’s what you should be doing

Retirement planning: Millennial, Baby Boomer, or GenX, here’s what you should be doing

RNC spokesperson Kayleigh McEnany discusses President Trump’s visit to Boeing in Missouri and whether Trump’s “phase two” of tax cuts will help more Americans with retirement.
Ready’s comments were given to FOX Business ahead of the release of the Wells Fargo/Gallup Investor and Retirement Optimism Index, on Tuesday, which found that although investors are optimistic about the state of the economy, this optimism isn’t necessarily translating to increased confidence about retirement savings.
Ready told FOX Business his recommendations on how retirement planning and saving should be approached, depending on age.
The Wells Fargo’s survey found that when it comes to thinking about retirement, the top concerns are how to spend leisure time (53%) and where to live (48%).
The important consideration for those about to retire or in retirement is deciding what assets to draw upon first, with the consideration if minimizing taxes and maximizing payouts.
Work in retirement?
People are having longer, healthier lives and therefore many are planning on working into retirement, Ready told FOX Business.
Although improved from four years ago, the Wells Fargo survey found that relatively few investors, 34% today versus 26% in 2014, say they are highly confident they will have enough money to maintain the lifestyle they want through retirement.
Ready told FOX Business that people should “save 10% of your salary, don’t put it off….Make sure you maximize your employer match.” For investors that are behind on retirement he recommends that investors set annual guidelines and goals, for example, a goal to increase their saving by 1% each year.
Ready also suggested reinvesting the tax savings from tax reform into retirement savings.

Which companies face higher labor costs and what it means for investors

Which companies face higher labor costs and what it means for investors

Jeffry Businesses are under pressure to raise worker pay against the backdrop of the lowest unemployment rate in 17 years and widespread complaints of labor shortages.
But some industries can handle higher labor costs better than others.
The tightening labor market is reflected in worker paychecks.
Read: The Fed is hogging the attention, but don’t forget this critical number for the economy The three industries most susceptible to higher labor costs are retail, health care and finance, Wells Fargo found.
These are people-centric fields in which labor is one of a company’s largest costs.
Here’s the facts How are companies responding to tighter labor markets?
Hourly wages typically increase as much as 4% annually when the labor market is as tight as it is now.
Most companies appear well positioned to absorb somewhat higher labor costs — that is, bigger paychecks for workers — without trying to stick it to consumers.
Corporate profit margins are also high, especially in fields such as manufacturing in which labor is just a small portion of operating costs.
Firms in industries with low profit margins that are most sensitive to the price of labor are the ones most likely to struggle.