Profits of US banks in Q3
Bank stocks have posted strong gains throughout the year so far, significantly outperforming the S&P. Whether stocks can extend these gains further depends on what third quarter earnings tell us.
What to watch:
The prospect of an interest rate hike by the Fed as soon as possible has been closely watched by the markets. A rate hike would be good news for banks’ net interest income. Such a move would widen the NII margin, helping to explain why banks have overtaken the market at large. However, with companies issuing bonds and consumers making the most of their stimulus money to pay off their credit cards, banks have struggled to increase lending.
Capital market performance
Underwriting in the capital market, a boom in mergers and acquisitions and the closing of record deals are expected to boost revenue streams at the banks that dominate this field, namely JP Morgan and Goldman Sachs.
Throughout the pandemic, banks have written off huge sums for bad debt reserves. Bad debts never materialized to the extent initially expected thanks to budgetary and monetary support. In the last quarter, the banks released some of these reserves, inflating profits. It could happen again this quarter.
Look more closely:
JP Morgan Chase – October 13e
Back in the second quarter, JPM beat revenue and profit expectations. However, he was still waiting for loan growth to show significant signs of recovery, a fairly important point for the United States’ largest lender. The bank also lowered its NII forecast, but the investment bank had a record quarter. Investors will be looking to see if the investment bank stays in the red and if there are stronger growth signs from loan growth and NII. His diversification and strong track record serve him well. Expectations are EPS of $ 2.99 for revenue of $ 29.7 billion. The whisper number is $ 3.19.
What next for the JP Morgan share price?
JP Morgan recovered early in the year but remained relatively subdued for most of 2021. The price was capped down $ 145 and up by $ 165. The price recently burst higher, with buyers targeting new all-time highs. The RSI favors further gains as it stays out of overbought territory. It would take a move below $ 160 to reverse the short-term uptrend.
Wells Fargo has underperformed its peers in recent years. It is the most sensitive bank to interest rates. It is also the best performing bank so far this year, growing 59% since the start of the year. However, the results are likely to be influenced by the amounts spent to comply with orders from regulators to improve control and risk management systems. Expectations are EPS of $ 1.04 for revenue of $ 18.46 billion. The whisper number is $ 1.04.
What’s next for the Wells Fargo share price?
The Wells Fargo stock price is trading in an uptrend, above its ascending trendline dating back to November of last year. The recent rally in the sma 50 combined with a bullish RSI keeps buyers bullish on further gains. A move above $ 49.85 could bring $ 51.40 back into play and new all-time highs. It would take a move below $ 43.46 for sellers to gain momentum towards the 200 sma at $ 41.91.
Bank of America – October 14e
Bank of America is also well positioned to take advantage of rising interest rates. Lending will be a priority after lending stops in the second quarter due to low interest rates and a declining loan portfolio. The expected 35% increase in the bank’s profits may well be due to lower provisions for bad debts and a rise in the NII. The share price has risen 46% so far this year. Expectations are EPS of $ 0.70 on revenue of $ 21.66 billion. The whisper number is $ 0.82.
What’s next for the Bank of America share price?
After rising sharply at the start of the year, the Bank of America stock price consolidated in the second and third quarters in a continuation pattern capped up at $ 43.50 and down at $ 43.50. $ 37.50. Just recently, the price has burst higher, trading at 13-year highs. Optimistic numbers and forecasts could see $ 50 a round figure and a level last seen in 2007 fall on target. During this time, one would have to go below $ 41.20 per sma 50 to reverse the short-term uptrend. While a move below $ 37.50 could see sellers gaining ground.
Citigroup – October 14e
Citigroup’s share price has underperformed its banking peers, rising just 20% year-to-date. Although it still surpasses the S&P at large. This year, Jane Fraser became Citigroup’s first female CEO and the leadership transition could be welcome news. Any update on strategic positioning will be the focus of attention in addition to the growth of the loan portfolio, particularly following the decline in revenues recorded in the second quarter. Citigroup reported a 12% drop in total revenue in the second quarter and loans were down 3% from the previous year. Investors are hoping to see improvement here. Expectations are EPS of $ 1.73 on revenue of $ 17.01 billion. The whisper number is $ 2.14.
What next for the Citigroup share price?
The share price has hovered around $ 70 over the past 4 months. More recently, after bouncing off $ 66 from September’s low, Citigroup stock price extended its gains above 50 and 200 sma. The RSI is slightly bullish. Buyers could look for a move above $ 74.75 to target $ 80. A move below 200 sma to $ 70 could lead to a bigger sell off towards $ 66, the September low.
Goldman Sachs – October 15e
Goldman Sach is expected to benefit from higher merger and acquisition costs amid the biggest global trading boom on record. Global mergers and acquisitions hit an all-time high in the third quarter as cheap financings sparked the desire to close deals. Expectations are EPS of $ 9.70 on revenue of $ 11.52 billion. The whispered figure of $ 12.34.
What’s next for the Goldman Sachs share price?
Goldman Sachs share price is attempting to recover the 50 sma after double bottoming at 370. A move above the 50 sma and horizontal resistance of $ 404 could lead to further gains towards $ 420 and new all time highs . A move below $ 370 could see sellers gaining ground towards the 200 sma at $ 350.
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