Citigroup to Lead Bank Stocks as Earnings Kick Off Monday

JPMorgan Chase & Co. usually kicks off bank earnings season, with the company's performance and Jamie Dimon's commentary a widely watched signal for how peers are likely to trade. This quarter, Citigroup Inc. is taking the spotlight with its fourth-quarter results due on Monday morning, followed by JPMorgan and Wells Fargo & Co. on Tuesday.

Bank stocks have rallied so far this year after a terrible 2018, with the KBW Bank Index adding more than 5 percent — outpacing the S&P 500's 3.4 percent gain. That bounce comes after the bank gauge fell almost 20 percent last year. Sensing whether there's more relief in store will be top of mind for investors.

Analysts became increasingly pessimistic as earnings approached, issuing a slew of cuts to ratings and price targets earlier this month. As of Friday midday, they'd trimmed estimates for earnings per share this fourth quarter by the most for any year-end quarter since 2016, according to data compiled by Bloomberg, with Goldman Sachs Group Inc. the hardest hit among the six biggest banks.

With eyes turning to Citigroup, the bank's cost-ratio outlook for 2019 will be key, according to Bloomberg Intelligence senior banks analyst Alison Williams. "Critical variables across the board for banks include geopolitics, loan growth, capital markets revenue and expense outlooks," Williams said.

In early December, a warning from Chief Financial Officer John Gerspach that Citi might post declines in fixed-income trading revenue for the last three months of the year, and Gerspach's cautioning that volatility may hinder 2018 targets, sent shares tumbling.

With that in mind, Citi's "forward look and a refresh of the bank's financial targets" will now capture attention, Credit Suisse analyst Susan Roth Katzke wrote in a note. "Rather than set another near-term efficiency target, we expect and prefer an articulated commitment to flattish expenses" through 2020.

Katzke flagged other important points, too, including management's take on the economy, global economic growth and the health of capital markets. She highlighted indications about card margins and growth in North America retail banking, including updates on the firm's national digital bank and its growth prospects in Mexico and Asia. And she noted discussion about investment banking pipelines and an early read on the market backdrop for trading, post-fourth quarter weakness, along with credit quality.

For JPMorgan, watch for "macro comments" amid recent weakness in many asset classes, and a focus on costs, which have been high, Deutsche Bank's Matt O'Connor wrote in a note. For Wells Fargo, there are three areas of focus: Regulatory updates and "fears the asset cap will linger," whether expenses will top expectations in 2019 due to lingering regulatory issues, and whether revenues can continue to grow.

At Bank of America Corp., watch for rate leverage, O'Connor said, while for Goldman, investors should focus on "a possible update on the strategic review of FICC, new business line reporting, and comments/reserves for 1MDB related issues." He also noted this will be the first earnings call for Goldman's new chief executive officer, David Solomon. Morgan Stanley's "market share gains have been impressive, but more effort on efficiency is needed and appears to be coming."

BI's Williams expects JPMorgan to "log another solid quarter, with big picture views" from Chairman and CEO Dimon. She anticipates that "lots of detail" about the bank's outlook will be saved for its Feb. 26 investor day.

Wells Fargo will likely start 2019 "a little cleaner after another legal settlement," though an accrual for that and a portfolio sale gain clouds the quarter, Williams said. The penalty-box bank's "asset cap lift is key, but we aren't likely to get much new there." For Goldman, "the most important issue driving the stock" is clarity about 1MDB costs.

CITIGROUP ESTIMATES

Earnings release expected Monday 8:00am New York time.
4Q adjusted EPS est. $1.55 (range $1.47 to $1.63)
4Q adjusted revenue est. $17.56b (range $17.27b to $18.47b)
4Q total trading rev. est. $2.88b
Equities $671.9m, FICC $2.23b
I-banking rev. est. $1.18b

JPMORGAN

Earnings release expected Tuesday at 7am
4Q adj. EPS est. $2.21 (range $2.05 to $2.41)
4Q adj. rev. est. $26.93b (range $26.05b to $28.12b)
4Q total trading rev. est. $3.57b
Equities $1.32b, FICC $2.29b
I-banking rev. est. $1.77b
4Q net yield on interest-earning assets est. 2.54%
4Q provision for credit losses est. $1.31b

WELLS FARGO

Earnings release expected Tuesday 8am
4Q EPS est. $1.19 (range $1.14 to $1.33)
4Q net interest margin est. 2.95%
4Q net charge-offs est. $736.8m
4Q provision for credit losses est. $675.4m

BANK OF AMERICA

Earnings release expected Wednesday at 6:45am
4Q adj. EPS est. 63c (range 59c to 67c)
4Q rev. net of interest expense est. $22.36b (range $22b to $22.90b)
4Q total trading rev. est. $2.64b
Equities $1.01b, FICC $1.64b
I-banking rev. est. $1.23b
4Q net interest yield est. 2.44%
4Q provision for credit losses est. $938.7m

GOLDMAN SACHS

Earnings release expected Wednesday at 7:30am
4Q adj. EPS est. $4.57 (range $2.29 to $6.88)
4Q net rev. est. $7.54b (range $6.02b to $8.60b)
4Q total trading rev. est. $2.5b Equities $1.57b, FICC $976.3m
I-banking rev. est. $1.93b

MORGAN STANLEY

Earnings release expected Thursday at 7am
4Q EPS est. 91c (range 76c to $1.07)
4Q net rev. est. $9.35b (range $8.97b to $10.17b)
4Q total trading rev. est. $2.82b
Equities $2.01b, FICC $822.5m
I-banking rev. est. $1.35

Citigroup to Lead Bank Stocks as Earnings Kick Off Monday

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Citigroup to Lead Bank Stocks as Earnings Kick Off Monday

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