Bank stocks aren’t doing badly today ahead of the start of earnings reports from the biggest banks starting on Monday. But to me it looks like today’s slightly upward bias is a bet not on good earnings but that analysts have gone too far with their cuts to bank earnings for the fourth quarter. The result, today’s action suggests, will be earnings that beat those lowered estimates.
Since third quarter earnings reports back in October, Wall Street analysts have cut their estimates for Goldman Sachs (GS), Bank of America (BAC), JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC) by an average of 8.1%. Earnings estimates for Goldman Sachs have taken the biggest hit with a 27% decline.
At today’s close shares of Goldman Sachs up 0.51%. JPMorgan Chase had moved lower by 0.46%. Citigroup was ahead 0.3%. Morgan Stanley had gained 0.17%. Wells Fargo increase by 0.27% and Bank of America, the big winner on the day, showed a 1.09% jump. The Financial Select Sector SPDR ETF (XLF) was up 0.25% on the day.
Citigroup begins earnings reports from the big banks on Monday with JPMorgan Chase and Wells Fargo on Tuesday and Bank of America and Goldman Sachs on Wednesday.
Among the big banks, analysts are expecting only Goldman Sachs to show a year over year drop in earnings to $4.94 a share for the fourth quarter of 2018 from $5.68 a share in the fourth quarter of 2017.
The Wall Street consensus currently calls for Citigroup earnings to climb to $1.55 a share from $1.28; for JPMorgan Chase earnings to go to $2.22 a share from $1.76; for Bank of America earnings to grow to 63 cents a share from 47 cent; for Wells Fargo earnings to increase to $1.19 a share from $1.16; and for Morgan Stanley earnings to push upwards to 92 cents a share from 84 cents.