Earnings Season: U.S. Banks Brace for Impact


Earnings season is looming for the largest U.S. banks, with JPMorgan Chase & Co., Citigroup Inc., and Wells Fargo & Co. all set to announce their second-quarter results on Friday, July 14. The following week, on July 18, Bank of America Corp., Goldman Sachs Group Inc., and Morgan Stanley will round out the “big six” industry group by reporting their earnings.

As anticipation builds, analysts have been revising their earnings estimates and, in most cases, lowering them. One significant factor impacting these estimates is the rising costs for deposits. Additionally, new information about banks’ plans to repurchase shares, or lack thereof, after the release of the annual regulatory stress tests results has also influenced the revisions.

Revised Estimates: Banks Feeling the Pressure

To illustrate the challenging environment facing the industry, let’s explore which banks have seen the most significant cuts to their consensus earnings estimates this year. Following that, we will delve into the banks that analysts rate most highly.

Banks with Largest Earnings Estimation Decreases

The following is a list of banks whose consensus earnings estimates have endured the most substantial reductions by analysts throughout this year:

  • Bank A
  • Bank B
  • Bank C
  • Bank D
  • Bank E

Banks with High Analyst Ratings

In contrast, these are the banks that analysts currently rate most favorably:

  • Bank X
  • Bank Y
  • Bank Z

Keefe, Bruyette and Woods: Revised Estimates and Insights

To gain deeper insights into this matter, we turn to Keefe, Bruyette and Woods (KBW), a reputable firm in equity research led by director David Konrad. They have recently published their revised estimates and price targets, providing invaluable data on the six largest U.S. banks based on total assets.

Earnings-per-Share Estimates for 2023 and 2024

KBW’s earnings-per-share estimates for the six banks based on total assets are as follows:

2023 Estimates

  • Bank A: $X.XX
  • Bank B: $X.XX
  • Bank C: $X.XX
  • Bank D: $X.XX
  • Bank E: $X.XX

2024 Estimates

  • Bank A: $X.XX
  • Bank B: $X.XX
  • Bank C: $X.XX
  • Bank D: $X.XX
  • Bank E: $X.XX

As earnings season approaches, the banking industry braces for the impact of revised estimates and the challenges ahead. Stay tuned for the official announcements from these key players in the coming weeks.

Downward Revisions for Banks’ Earnings Estimates

It’s no surprise that banks’ earnings estimates are seeing downward revisions. The industry is facing a squeeze on margins as savers move their money in search of better interest rates on deposits. However, what’s noteworthy is that the 2024 EPS estimates are lower than the 2023 estimates for three specific banks, which could potentially exert further downward pressure on their stocks.

Revised Price Targets and Total Returns

Let’s take a look at KBW’s revised price targets for this group of banks, along with the total returns for this year (including dividends reinvested) for each respective stock:

Largest Cuts to Consensus Earnings Estimates

To gain a broader perspective of the industry, we examined the largest 50 banks based on total assets in the Russell 3000 Index (RUA), which aims to represent approximately 98% of publicly listed companies in the United States, based on market capitalization.

Identifying Banks

To determine whether a company falls under the category of a bank, we considered entities that file regulatory call reports as banks or bank holding companies, as well as savings and loan holding companies (for instance, Charles Schwab Corp.).

The Top 20 Banks with the Largest Decline in Consensus 2023 Earnings Estimates

Out of the analyzed banks, the following 20 have experienced the most significant decline in consensus 2023 earnings estimates since the previous year:

  1. PacWest Bancorp (PACW) -6.12%
  2. [Remove the remaining author details and specific stock market information]

PacWest Bancorp: A Struggle for Liquidity

PacWest Bancorp leads the list of banks and is the only one within the top 50 expected to report a net loss in 2023. The bank has been actively working on improving its liquidity by selling assets, with its most recent announcement regarding the sale of a loan portfolio to Ares Management Corp.

Analysts’ Favorite Banks Among the Largest 50

Let’s take a more positive turn and look at the analysts’ favorite banks among the top 50 in terms of total assets.

Buying Opportunities for Investors?

Out of the top 50 U.S. banks, ten have been rated buy or equivalent by at least 75% of analysts polled by FactSet. These stocks are listed below, sorted based on their 12-month upside potential determined by consensus price targets:

Changes in Consensus Earnings Estimates for Preferred Banks

To provide further insight, let’s dive into the changes in consensus earnings estimates for this select group of ten bank stocks favored by analysts:

[Remove specific stock market information and details about First Citizens BancShares Inc.’s EPS increase]

Note: When considering any of the listed banks for investment purposes, it is crucial to conduct your own research and not solely rely on these stock screens.

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