Financials: What's in Store for Goldman Sachs, JP Morgan, Bank of America and Citigroup?
Wells Fargo (NYSE: WFC) kicked off financial earnings Friday, and it's super busy in the sector this week with earnings due from Goldman Sachs (NYSE: GS), J.P. Morgan Chase & Company (NYSE: JPM), Bank of America (NYSE: BAC) and Citigroup (NYSE: C).
Fourth-quarter numbers from Wells Fargo looked pretty good on the surface, but Wall Street focused on the banks' net interest margin -- basically the difference between the interest rate received on interest-earnings assets (loans) and the interest rate paid on interest-earning liabilities (customer deposits). It came in at 3.56 percent versus 3.89 percent a year ago and 3.66 percent in the third quarter. Earnings and sales growth came in better than expected with quarterly profit up 25 percent from a year ago to $0.91 a share. Sales rose six percent to $21.9 billion.
Technically, Wells Fargo still looks solid. It's been toying with a breakout over $35.19 -- its December 18 intraday high -- but hasn't really gotten going yet. On Friday, the stock enjoyed a nice bounce off its 20-day simple moving average (SMA) after early weakness. It finished near its high for the session as big buyers came in late.
Here are some quick thoughts on other financials set to report this week.
Goldman Sachs: Earnings due Wednesday before the open (EPS estimate +101 percent to $3.70 a share; sales +31 percent to $7.9 billion). In the third quarter, investment banking revenue rose 49 percent from a year ago. Revenue from stock trading fell 16 percent from while its bond trading division increased revenue by 28 percent. Technical take: Stock is extended (too late buy) after recent breakout over $129.72. Wait for pullback. $129 looks like solid support level.
J.P. Morgan Chase & Company: Earnings due Wednesday before the open (EPS estimate +30 percent to $1.17 a share; sales +10 percent to $24.4 billion). In the third quarter, net interest margin fell to 2.43 percent from 2.66 percent a year earlier, but the company's mortgage lending business showed signs of life. New home loans and refinancings totaled $47 billion in the third quarter, up 29 percent from the third quarter of 2011. Technical take: Recent breakout over $44.54; not quite extended yet but wedging higher in light volume in recent days. Wait for pullback -- expecting $44 to be solid support level.
Bank of America: Earnings due Thursday before the open (EPS estimate -87 percent to $0.02 a share; sales -16 percent to $21 billion). In the third quarter, new home loans and financings rose 12 percent sequentially and 18 percent from a year earlier. Investment banking increased 17 percent from the second quarter and 44 percent from a year ago. Technical take: Extended after recent breakout over $10 but good supporting action at 20-day moving in recent days -- not a buyer at current levels; could use more of a breather.
Citigroup: Earnings due Thursday before the open (EPS estimate +210 percent to $0.96 a share; sales +10 percent to $18.8 billion). In the third quarter, Citigroup didn't benefit from the wave of new mortgages and refinancings as much as its competitors. Mortgage originations fell 15 percent from a year earlier to $14.5 billion. Meanwhile, a lending slowdown in Asia was offset by growth in Latin America. Technical take: Under accumulation more than the other three, but also extended after recent breakout over $39. Don't chase. Support at $40.
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