Over the last five trading days, earnings releases continued to dominate headlines for the banking industry. Performance of banks remained impressive with legal charges not largely hampering their financials. Further, several streamlining initiatives undertaken to improve efficiency and lower expenses bore fruits.
Moreover, banks are easily beating estimates due to significant downward revisions just before the releases. The concerns behind the downward estimate revisions by analysts appear to be valid as the overall interest rate backdrop remained challenging for banks, adversely impacting their net interest income. Further, pressure on revenues continued to strain bottom-line growth.
All these concerns got reflected in the movements of banking stocks, which were almost muted over the last five trading sessions.
(Read the last Bank Stock Roundup for Apr 17, 2015)
Recap of the Week’s Most Important Developments:
1. SunTrust Banks, Inc.’s STI first-quarter 2015 earnings of 78 cents per share outpaced the Zacks Consensus Estimate of 72 cents. Results benefited from a decrease in expenses and provisions as well as higher non-interest income, partly offset by lower net interest income. Growth in loans and deposits as well as asset quality was witnessed during the quarter (read more: SunTrust Q1 Earnings Beat on Lower Costs & Provisions).
2. Higher expenses led BB&T Corp. BBT to report first-quarter 2015 adjusted earnings per share of 68 cents, which lagged the Zacks Consensus Estimate of 70 cents. Lower-than-expected results were triggered by a rise in operating expenses and higher provision for loan losses, partially offset by higher revenues. Further, improvement in credit quality as well as growth in average loans and deposits remained impressive (read more: BB&T Q1 Earnings Miss on Higher Expenses, Revenues Rise).
3. Comerica Inc.’s CMA first-quarter 2015 earnings per share of 73 cents came a penny ahead of the Zacks Consensus Estimate. Results were aided by growth in non-interest income, partly offset by a fall in net interest income, higher expenses and increased provision for credit losses. Moreover, the quarter experienced growth in loan and deposit balances and exhibited a strong capital position (read more: Comerica Earnings, Revenues Beat Estimates, Profits Down).
4. Regions Financial Corp.’s RF first-quarter 2015 earnings from continuing operations came in at 16 cents per share, missing the Zacks Consensus Estimate of 18 cents. Results were affected by higher provisions for loan losses and increased non-interest expenses, partially offset by top-line growth. However, increase in loans and deposits were the positives for the quarter (read more: Regions Financial Q1 Earnings Miss on High Provisions).
5. Fifth Third Bancorp's FITB first-quarter 2015 earnings per share came in at 44 cents, beating the Zacks Consensus Estimate by 18.9%. Better-than-expected results were driven by a surge in non-interest revenues and lower expenses, partially offset by decreased net interest income. Further, provisions for loan and lease losses remain unchanged year over year; while improved loan and deposit balances and a strong capital position were among the other positives (read more: Fifth Third's Q1 Earnings Beat on Better Revenues).
Price Performance
Overall, the performance of banking stocks remained subdued. We believe initial cheer for earnings beats gave way to concerns about future growth prospects.
-4.9%
WFC
1.5%
9.9%
C
0.3%
3.6%
COF
-0.2%
5.2%
USB
0.9%
7.1%
PNC
0.5%
13.3%
In the last five trading sessions, Wells Fargo & Company WFC was the top gainer with 1.5% rise in its shares, followed by U.S. Bancorp and Bank of America Corp.’s BAC, increasing 0.9% and 0.8%, respectively. However, shares of Capital One and JPMorgan Chase & Co. declined marginally.
Over the last 6 months, The PNC Financial Services Group, Inc. and Wells Fargo were the top performers, with their shares advancing 13.3% and 9.9%, respectively. On the other hand, BofA declined 4.9%.
What's Next in the Banking Universe?
Bank earnings will mostly tread the last phase in the upcoming week. Among others, Popular, Inc. is scheduled to release on Apr 27. Both Hudson City Bancorp, Inc. HCBK and Cullen/Frost Bankers, Inc. CFR will report on Apr 29.
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Click to get this free report BB&T CORP (BBT): Free Stock Analysis Report REGIONS FINL CP (RF): Free Stock Analysis Report COMERICA INC (CMA): Free Stock Analysis Report HUDSON CITY BCP (HCBK): Free Stock Analysis Report SUNTRUST BKS (STI): Free Stock Analysis Report FIFTH THIRD BK (FITB): Free Stock Analysis Report WELLS FARGO-NEW (WFC): Free Stock Analysis Report BANK OF AMER CP (BAC): Free Stock Analysis Report CULLEN FROST BK (CFR): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research