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US bank earnings look ahead

US banks kick off reporting season in earnest, and with several big names at all-time stock highs, there is significant pressure not to disappoint. 

US banks
Source: Bloomberg

US banks are expected to see earnings growth of 5.5% overall for the third quarter, while revenues are forecast to grow by 4.3%. With the US economy roaring ahead, despite the recent non-farm payrolls (NFP) miss, most US banks are expected to see good growth, as interest rates rise and are forecast to rise further, while demand for loans, mortgages and other products remains strong.

The one bleak spot may be Wells Fargo, which, besieged by a multitude of troubles, is expected to report profits unchanged from a year earlier.

JP Morgan

An all-time high for JP Morgan shares confirms the strength of this bank’s business, with more upside looking likely. The shares have seen steady gains since June 2016 and dips since then have been furiously bought, with the latest dip in September hitting the 200-day simple moving average (SMA).

The high from last week is $98.09, so a breakout from here puts the stock in all-time high territory. JPMorgan is expected to report $1.65 per share in earnings, up 4.3% from a year ago, while revenues rise 0.6% to $25.6 billion. 

JP Morgan chart

Citigroup

Citigroup shares have hit fresh multi-year highs, driven by improvements in the US economy. For now, there is a substantial gap between the price currently, and even the 50-day SMA (currently $69.46), being $72.19 and then $69.86.

Citigroup’s revenue is expected to rise by 0.5% to $17.8 billion, while earnings are forecast to be 4.5% stronger at $1.30 per share.

Citigroup chart

Bank of America

The Bank of America (BoA) is forecast to report a 9% rise in earnings, to 46 cents per share, while revenues remain flat at $21.96 billion. A breakout to fresh multi-year highs is seen here too.

The compression in the moving averages provides an indication of a major move, which duly resolved higher. Pullbacks may find support at $25.78, and then $25.34. 

BoA chart

Goldman Sachs

Goldman Sachs is expected to see a 14% fall in earnings, to $4.17 per share, and an 8% drop in revenues to $7.5 billion. Unlike other banks, the shares have yet to create new-time highs in the past few months, having essentially gone nowhere since the February high at $255.

However, as with others, the dip into early September found buyers, and we would need to see a firm push below $210 to negate the relatively bullish outlook. 

Goldman Sachs chart

Morgan Stanley

Revenue for Morgan Stanley is expected to report a 1.6% rise in revenues, to $9.05 billion, while earnings rise 2.2% to 81 cents per share. A sharp drop back from recent highs has seen the price move back below the $49.61 high from July.

Further declines will challenge support at $47.73, and then down to the post-June 2016 rising trend, which might suggest a dip to $45.80.

Morgan Stanley chart

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