Author: Gary Ashton
Estimated read time: 3 minutes
Publication date: 13th Jan 2020 10:02 GMT+1
This week the US banks will kick off fourth-quarter earnings season with JP Morgan (NYSE: JPM) and Wells Fargo (NYSE: WFC) announcing before the market open on January 14th, followed by Bank of America (NYSE: BAC) the following day. Analysts are optimistic with increases to JP Morgan’s earnings estimates up more than 3% in the last 90-days and Wells Fargo’s higher by nearly 2% in the same period. Earnings ratings are also on the optimistic side, with a “strong-buy” rating for JP Morgan and Bank of America.
2019 has been a strong year for the US banking sector compared to Europe, where negative interest rates have cut into banks' net interest margins. Both JP Morgan and Bank of America have beaten analysts’ estimates every quarter this year. JP Morgan had a 14.22% positive earnings surprise in 1Q19 and Bank of America a 10.3% positive surprise in 3Q19. Wells Fargo missed analysts' estimates by 20% in 3Q19 with a reported EPS of $0.92, but this was due to some one-off expenses that analysts anticipate will not be repeated in 4Q19.
The US financial sector has mostly tracked the S&P 500 in 2019, as the chart below indicates. For example, the Financial Select Sector SPDR ETF (AMEX: XLF) is up 25.27% in the last 12 months compared to 25.77% for the S&P 500 stock index. The performance of US banks is miles ahead of European banks who are struggling to remain profitable. The iShares MSCI Europe Financials ETF (NASDAQ: EUFN) shows a significant difference with a return of just 8.8% in the last year. Analysts will be keenly watching the results of these three large US banks this week for an indication of where the sector could go in 2020.
You can follow all the results using our Earnings Calendar. To see the same three stocks mentioned in this blog, choose “S&P 500” from the market down in the upper left of the page. Next, to filter down the stocks, select “Mega ($200 bn - more)” from the market cap - down box in the same upper left part of the webpage. Finally, if not already selected, choose “This Week” in the middle of the page on the left. When finished, you should be able to see the same three stocks mentioned here. If you cannot view these filters, try clicking the “down arrow” in the upper right of the screen to reveal them.
Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.com. The observations he makes are his own and are not intended as investment or trading advice.
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