Mixed results for banks as earnings season kicks off

Summary:

• US500 remains near recent highs

• Several major firms report earnings ahead of the open

• Focus on 5 financial stocks; JPM, Citi, GS, Wells Fargo and Blackrock

Despite some more negative trade headlines this morning coming out of China, US stock futures are actually trading a little higher ahead of the opening bell. Trade has dominated the headlines as far as Wall Street is concerned in recent weeks and while it is unlikely to disappear anytime soon, there is a new driving force to keep an eye on as the Q3 earnings season kicks off in earnest today. 

Several of the largest financial firms have reported their latest trading results ahead of this afternoon’s opening bell with the overall feeling somewhat mixed with JP Morgan putting up some solid numbers while Goldman Sachs announced a disappointing miss. 

JP Morgan - Q3 EPS: $2.68 vs $2.45 exp. Revenue: $30.1B vs $28.5B exp.

 A pleasing performance for JP Morgan saw the bank beat the street on both the top and bottom line in Q3 with strong consumer banking operations helping to mitigate the impact of lower interest rates.

Shares are expected to start brightly this afternoon with the stock looking to probe the top of the range around 120 that has provided a ceiling in the past couple of years. Source: xStation 

Citigroup - Q3 EPS: $1.97 vs $1.95 exp. Revenue: $18.6B vs $18.55B exp

These earnings exclude a tax benefit of $0.10/share which if taken into account paint a more positive picture for the firm. However, a lower than expected net interest margin is a possible concern and the pre-market trade is pointing towards a red open later.

The stock has been towards the higher end of its past range in recent trade but is expected to start lower this afternoon. Source: xStation 

Goldman Sachs - Q3 EPS: $4.79 vs $4.86 exp. Revenue: $8.32B vs $8.31 exp

A miss on earnings is the main takeaway here and when you consider that the firm made $6.28 for the same period last year it looks even worse. Goldman said it had taken losses of $267m in the third quarter for “investments in public equities, primarily from investments in Uber, Avantor and Tradeweb”. The losses were taken though its investment and banking division and combined account for approximately $0.71/share. 

Another chart lacking a clear longer-term trend of late is Goldman Sachs with shares called to start lower by around 2%. Source: xStation    

Wells Fargo - Q3 EPS; $0.92 vs $1.24 exp. Revenue: $22B vs $21.09B 

Another miss on earnings here with lower interest rates adversely impacting profits.  The lender also took a financial hit related to the fake-account scandal that has dogged Wells Fargo since 2016. The company booked a $1.6 billion charge for legal costs related to its long-running sales-practices problems, but also had a $1.1 billion gain related to the sale of a business.

Shares are expected to start lower this afternoon but a longer term base could be forming with the 43 region potential support. Source: xStation 

Blackrock - Q3 EPS: $7.15 vs $6.96 exp. Revenue: $3.69B vs $3.58B prior

The world’s largest asset manager posted a solid set of results, beating on earnings and seeing a small increase in revenue. Assets under management rose 8% in the third quarter to now stand at just under $7T. Chairman and CEO Larry Fink also offered a fairly positive take on the markets at present. “We’re paying so much attention to political and geopolitical issues that we’re losing sight that the world still is moving forward,” Fink said on “Squawk Box.” “It’s not great but not as bad as we feel every morning we wake up.”

Blackrock shares are currently in the D1 cloud but if they can get back above 445 then the outlook becomes more favourable: xStation