Market Reaction To Bank Earnings Is Mixed, JPMorgan Analysts Project Further Decline In Net Interest Income

Zinger Key Points
  • The reaction to bank earnings thus far has been mixed, with some stocks witnessing declines while others post gains.
  • Retail deposit dynamics and competition from money market funds underscore banks' strategies amidst potential rate cuts.

As the U.S. financial sector grapples with recent earnings releases, investor reactions have been mixed.

Some stocks are witnessing declines. Others are posting gains. See below.

Banks Q1 Earnings Reports And Market Reactions, So Far

CompanyTickerMkt Cap ($ mn)Price ($)RatingJPMorgan Price Target End DateQ1 Earnings DateEPSRevenueStock Reaction (since earnings) as of April 18, 2:40 PM ET
Citigroup Inc.C119,590.8062.84N64Dec-24Apr 12BeatBeat-4.46%
Wells FargoWFC206,396.9057.35N59Dec-24Apr 12BeatBeat-0.11%
Bank of AmericaBAC294,502.2037.3OW39.5Dec-24Apr 16BeatBeat2.43%
PNC FinancialPNC63,173.54157.54OW163.5Dec-24Apr 16BeatMiss-0.79%
Citizens Financial GroupCFG16,343.2935.04N36.5Dec-24Apr 17BeatMiss2.76%
U.S. BancorpUSB67,352.3443.23OW45Dec-24Apr 17BeatMiss-3%
Fifth Third BancorpFITB24,506.8835.98N37.5Dec-24Apr 19
Regions FinancialRF18,812.6420.36N21Dec-24Apr 19
Truist Financial CorpTFC50,535.5237.89N39.5Dec-24Apr 22
US Banks Q1 2024 Earnings

Citigroup Inc C and Wells Fargo WFC reported earnings on April 12. Both firms beat EPS and revenue estimates.

Citi stock is down 4.46% while Wells Fargo’s stock is down 0.11% since April 12.

Bank of America BAC reported a beat on both metrics; PNC Financial PNC fell short of consensus estimates on revenue. BAC stock is up 2.43% since then, but PNC is down 0.79%.

Then there’s Citizens Financial Group CFG. The firm reported a beat on EPS but a miss on revenue on Wednesday. Citizens stock was trading up 2.76% during day trading on Wednesday by 2.40 PM ET.

U.S. Bancorp USB reported a beat on EPS, but a miss on revenue. The firm’s stock was trading down by more than 3.3% at last check Wednesday, trading at $39.62 a share.

Macroeconomic Concerns

With the Fed delaying the rate cut decision, market sentiment towards banks and bank stocks appears muted, despite earnings beats.

The SPDR Financial Select Sector ETF XLF has experienced a 1.17% decline since then (April 12), reflecting the market’s subdued sentiment.

Regional banks, represented by the SPDR S&P Regional Banking ETF KRE, have also dipped by 1.66% over these past 5 days.

Upcoming earnings reports include:

  • Fifth Third Bancorp FITB, Friday, April 19.
  • Regions Financial RF also April 19
  • Truist Financial Corp TFC, Monday, April 22

What Lies Ahead For Banks In 2024?

JPMorgan Chase anticipates a challenging quarter for banks. The firm’s analysts project a further decline in net interest income by approximately 3.6%; weak loan performance is expected to decrease by 0.8% quarter-over-quarter.

Moving forward, banks’ ability to reduce deposit costs in response to potential rate cuts by the Federal Reserve, will be critical, notes JPMorgan, drawing attention to the ongoing competition posed by U.S. money market mutual funds.

Particularly during periods of rate adjustments, these tend to influence banks’ deposit pricing strategies.

Moreover, JPMorgan notes that retail segment deposits are expected to exhibit lower betas to rate cuts, with retail deposits comprising a significant portion of banks’ total deposits.

Notably, Citizens, Regions, Wells Fargo, and Truist have relatively higher shares of retail deposits, albeit with nuances in their compositions.

Citi stands out with a smaller proportion of U.S. retail deposits but holds a larger volume of overseas deposits, characterized by lower deposit betas compared to the US market.

More on this aspect, covered here: Big Banks To Report Q1 Earnings: Analyst Prefers Bank Of America, ‘Citi Likely To Lag’

For investors, the key lies in selective stock picking, favoring well-capitalized banks with robust reserves and reduced exposure to commercial real estate. The upcoming reports will provide valuable cues for investors navigating the financial landscape in the months ahead.

Read Next: Financial Stocks Fall After Earnings, Major Banks Notch 4-Day Losing Streak: Regional Banks Hit Lowest Level Since Late 2023

Image: Midjourney

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