Banking & Finance

Which Bank Will Have the Best Earnings?

piggy bank
Source: Thinkstock
The quarterly beauty contest known as earnings season got off to an indifferent start this week, and as we look ahead to next week, one sector that will be watched closely is the big banks, all of which report second-quarter earnings during the week. Quarterly performance is just one issue, though, and investors might want to pay more attention to what the banks have to say about the recent collapse of China’s equity market, and then of course there’s Greece.

Here is a look at what to expect from the country’s largest financial institutions. On Tuesday, JPMorgan Chase & Co. (NYSE: JPM) and Wells Fargo & Co. (NYSE: WFC) are scheduled to report second-quarter earnings. On Wednesday, we will hear from Bank of America Corp. (NYSE: BAC), and Thursday brings reports from Citigroup Inc. (NYSE: C) and Goldman Sachs Group Inc. (NYSE: GS).

JPMorgan Chase is expected to post earnings per share (EPS) of $1.44 on revenues of $24.53 billion. In the year-ago quarter, the bank reported EPS of $1.46 on revenues of $25.35 billion. JPMorgan beat estimates last quarter with numbers roughly equal to the consensus estimates for the second quarter. The stock price rose nearly 12% in the quarter, the best of any of the big banks. The bank is still shrinking somewhat, but first-quarter results were able to overcome the decline by taking advantage of the volatility in the markets caused by macro events. If JPMorgan can control its expenses, it should have another decent quarter. The bank’s forward price-to-earnings (P/E) ratio is 10.22 and the price-to-book ratio is 1.13. The consensus price target is $71.57, and shares closed at $66.11 on Thursday, implying a potential gain of about 8.3%.

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Wells Fargo is tabbed to report EPS of $1.03 on revenues of $21.68 billion. In the second quarter of 2014, the bank posted EPS of $1.01 on revenues of $21.07 billion, and first-quarter EPS came in at $1.04, a 6% surprise to the upside. Wells Fargo’s share price rose just 3.4% in the second quarter, the smallest gain among the big banks. The bank’s revenue growth is predicated on increases in service charges, fees and mortgage banking. Investment banking is likely to be a soft spot. The consensus price target for Wells Fargo is $58.49, and shares closed at $55.50 on Thursday, for an implied upside of about 5.4%. The bank’s forward P/E ratio is 12.36 and its price-to-book ratio is 1.69.

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