By Steve Gelsi
Up next is Citigroup, which is expected to earn $1.68 a share on revenue of $18.4 billion. The bank’s second-quarter earnings forecast has fallen by eight cents since the March 31 analyst estimate of $1.76 a share, according to FactSet.
Wells Fargo is expected to earn 80 cents a share on revenue of $17.47 billion. Its second-quarter earnings target stood at 95 cents a share on March 31.
Bank of America is expected to report earnings of 75 cents a share on revenue of $22.7 billion, according to FactSet. At the end of the first quarter, analysts had expected the company to earn 83 cents share.
Finally, Goldman Sachs /zigman2/quotes/209237603/composite GS +4.68% is on tap to earn $6.56 a share on revenue of $10.78 billion, according to Fact. On March 31, analysts had expected the bank to earn $9.35 a share.
BofA Securities analyst Ebrahim H. Poonawala made it clear in his June 29 upgrade of Goldman Sachs to buy from hold that the investment bank and all other players in the industry face a bumpy road ahead.
“Our ratings change (first upgrade of 2022) does not indicate an improved outlook for bank stocks,” Poonawala said. “To the contrary, we see [Goldman] stock as well-positioned to outperform in what is likely to be a worsening economic backdrop that could weigh more materially on the EPS outlooks for its balance sheet lending heavy peers.”
Goldman offers an attractive risk/reward profile relative to other bank stocks, he said.
“We believe that the volatility in the interest rates, FX, commodities markets is unlikely going away anytime soon and should serve as a tailwind for the markets business,” Poonawala said. “We also expect GS’s strong risk management to mitigate any material negative surprises owing to market dislocations.”
Oppenheimer analyst Chris Kotowski said it’s reasonable to expect some noise in banks’ second-quarter results, but for the most part, he expects in-line fundamental trends.
Banks signaled their relative health in mid-June conferences such as the Bernstein Strategic Decisions Conference and other gatherings.
“Bank after bank came out and said things were tracking well,” Kotowsky said in his recent note. “Loan growth and net interest margins (NIM) were, if anything, better than expected; expenses OK; and credit continues to track better than expected. Clearly with Jamie Dimon’s ‘hurricane’ out there, 2Q22E doesn’t tell us much where we’ll be in 12–18 months, but so far the visible trends are generally favorable.”
Citi analyst Keith Horowitz on Tuesday upgraded JPMorgan Chase & Co. to buy from neutral and cut his price target on the stock to $135 a share from $145 a share.
Horowitz said he sees potential upside on the bank’s earnings per share and that it offers a relative bargain compared to its peers.
“The stock no longer reflects premium valuation and higher capital levels (and limited buybacks) now seem priced in,” Horowitz said.
The move came as part of his overall outlook for the second-quarter earnings season for banks. “While higher interest rates are a clear positive for bank returns, investor sentiment remains negative due to concerns that Fed action will lead to large credit losses (not reflected in consensus estimates), potential breaks in financial plumbing, and the wildcard of additional regulatory action raising capital requirements,” Horowitz said.