Winners and Losers from Start of Earnings Season
October 22, 2015 9:00 AM
Third-quarter results have been decidedly mixed: while the largest banks have been knocked off balance by volatile markets, many regionals have charged forward.
First Out of the Gate Stumbles
JPMorgan Chase, traditionally the first big bank to report , set an ominous tone with its earnings release Oct. 13. Revenue fell across all its major businesses, and Chief Financial Officer Marianne Lake warned analysts that their estimates for the rest of the year "appear high."
Wells Underwhelms
Wells Fargo's profit rose just 1% from a year earlier, a so-so mark for a company that's gotten Wall Street accustomed to outperformance. Mortgage revenue, usually a strength, was down and looks likely to fall further, but Chief Executive Officer John Stumpf touted Wells' 8% growth in total loans as "some of the strongest we've seen in years."
B of A's Bright Spots
The Charlotte, N.C., company's trading and money-management revenue came in weaker than expected, but it beat earnings estimates on lower costs . CEO Brian Moynihan also praised the work of the consumer-banking unit, which was the only major division to post revenue gains.
Citi Avoids Foreign Entanglements
Analysts had thought turmoil in the emerging markets would batter Citigroup, but the company surprised with a strong quarter that included decent performances from its international businesses . CEO Michael Corbat said the result shows Citi can "handle what the world throws our way."
Goldman, Morgan Stanley Fall Flat
Goldman Sachs and Morgan Stanley both badly missed earnings forecasts as trading revenue fell off a cliff. Morgan Stanley CEO James Gorman blamed market volatility for its revenue drop, the company's largest in three years.
Regionals Rev Up Revenue
Unlike megabanks, many regionals managed to boost their revenue in the third quarter – but at a cost. U.S. Bancorp's revenue grew 3% , but a corresponding increase in costs led CEO Richard Davis to target discretionary spending and do other things to try to slow down expense growth.
PNC Sits on Its Hands
PNC Financial Services' profit was right in line with expectations, and CEO Bill Demchak said there's not much he can do to improve matters until the Federal Reserve raises interest rates. "Until rates move, our ability to materially grow the company…is a struggle," he said.
To Buy or Not to Buy
Not every bank CEO is taking Demchak's wait-and-see approach. First Horizon National CEO Bryan Jordan said he's looking for acquisitions to drive fee revenue and counteract low rates. The Memphis company's margin continued to contract in the third quarter.
KeyCorp Staffs Up
KeyCorp showed the fruits of a similar strategy in the third quarter, recording one of the biggest quarterly gains among regionals as recent investments in fee-based businesses helped lift revenue. CEO Beth Mooney has also been on a hiring spree, luring more than 60 senior bankers away from the Cleveland company's rivals in the Midwest.
M&T Misses, But Help Is On the Way
M&T Corp in Buffalo, N.Y., missed earnings estimates as many of its fee-based businesses declined. But with the long-delayed acquisition of Hudson City Bancorp finally completed last month, CEO Robert Wilmers can still be pleased with the quarter.
Regions' Energy Jitters
Dark clouds are gathering over Regions Financial's energy portfolio. The Birmingham, Ala.,company's profit dropped 17% as worries about its energy loans led CEO Grayson Hall's team to more than double its loan-loss provision.
Zions Dodges Oil Slick
Another regional with a big energy business, Zions Bancorp. in Salt Lake City, also raised its loss provision due to low oil prices, but CEO Harris Simmons and his staff managed to use cost cuts to increase quarterly profit anyway.
Steering Around Other Risks
It wasn't just energy that caused companies to hedge their bets. Fifth Third Bancorp in Cincinnati raised its provision due to a student-loan-backed commercial credit, and Signature Financial in New York did the same over weaknesses in its portfolio of taxi-medallion loans, though both companies also beat estimates and raised their quarterly profits.
