The Q1 earnings season for bank stocks commences today, with some of the big names reporting their results, before the opening bell. The year 2017 began on a positive note, with improving rate scenario and President Donald Trump’s policy goals.
Banks’ trading revenues are anticipated to continue rising on the back of strength in equity, and fixed income and currencies. Uncertainty related to Trump’s policy changes should have led to better trading activities.
Apart from this, banks are likely to witness an increase in investment banking fees attributable to robust M&A activity, as well as increase in debt and equity underwriting. Further, cost control efforts should continue supporting the bottom line.
While a rise in prime lending rates for all major banks due to the Fed’s recent rate hikes should ease some pressure on margins, negligible loan growth during the quarter is likely to partially offset the benefit. Moreover, an increase in provision for credit losses, mainly due to rise in credit card debt, is likely to have an adverse impact on the banks’ financials.
Therefore, per our latest Earnings Preview article, overall earnings for the major banks in first-quarter 2017 are expected to be up just 0.2% year over year.
Nonetheless, there might be a surprise in store for major banking stocks this earnings season. Let’s take a look at the four major banks scheduled to announce their results tomorrow.
JPMorgan Chase & Co. (JPM – Free Report) will kick off the first-quarter earnings season for the banking sector. With a Zacks Rank #3 (Hold) and Earnings ESP of -0.66%, the chances of the company beating the Zacks Consensus Estimate is low this time around.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Slowdown in loan growth is expected to hurt net interest income growth. However, improvements in trading and mortgage revenues, as well as expense reductions are anticipated to support the company’s financials. (Read more: Can JPMorgan Break Out of Recent Sloth on Q1 Earnings?).
Notably, JPMorgan surpassed the Zacks Consensus Estimate in all the trailing four quarters, as shown in the chart below:
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