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The Big Bank Q4 Earnings Roundup: Tax Charges Drag Bottom Lines

The Big Bank Q4 Earnings Roundup: Tax Charges Drag Bottom Lines

Big banks began to report earnings in the week ended Jan. 12, and the financial earnings news flow continued into the week ended Jan. 19.

A Muted Show

The financial sector turned in 2.4-percent year-over-year revenue growth for the fourth quarter, the second lowest of all the eleven sectors, according to Factset's Earnings Insight report for the week ended Jan. 12. The broader financial sector includes five industries, and among these, consumer finance recorded the strongest growth — 8 percent — while the insurance industry reported a 2-percent revenue decline.

Financials are expected to report 6.4-percent year-over-year earnings growth, a marked downward revision from the 11.6-percent growth estimated way back in December.

A lack of volatility in the financial markets tempered expectations concerning trading revenues, and this was a theme that ran across earnings reports from multiple banks. The segment was also up against a tougher compare with the year-ago quarter, which enjoyed volatility amid the Brexit talks and the U.S. presidential election results. That said, the higher Fed funds rate and favorable macroeconomic conditions provided some offset.

Here's a rundown on the big banks' earnings reports. 

Bank of America's Revenue Disappointment

Earnings Date: Before the market open Jan. 17.

Bank of America Corp (NYSE: BAC) reported Q4 adjusted earnings of 47 cents per share, exceeding the 44-cents-per-share consensus expectation. 

The company incurred a charge of $2.9 billion related to the tax bill. 

Revenues net of interest expense and the impact of tax bill was $21.4 million, with net interest income growing 12 percent thanks to higher short-term rates and deposit and loan growth.

Revenue came in shy of estimates.

Among the segments, consumer banking revenues were up 10 percent; global wealth and investment management revenues climbed 7 percent; and global banking revenues increased 10 percent. Sales and trading revenues excluding debit valuation adjustment, or DVA, fell 9 percent, with FICC revenues slipping 13 percent and equities trading revenues remaining flat.

Stock Reaction: BofA shares, which climbed following the results of JPMorgan Chase & Co. (NYSE: JPM) report Jan. 12, eased in reaction to results on Jan. 17, dropping about 3 percent intraday before ending the session down 0.2 percent at $31.18.

See also: YCharts Visualizes All The Data A Financial Advisor Needs

Citi Beats On Bottom Line

Earnings Date: Before the market open Jan. 16.

Citigroup Inc (NYSE: C) reported net income — excluding the estimated impact of tax reform — of $3.7 billion, or $1.28 per share, exceeding the $1.19-per-share consensus estimate. On a reported basis, the company had a net loss of $3.6 billion, or $1.14 per share.

The net loss included a one-time, non-cash charge of $22 billion, or $8.43 per share, comprising a $19-billion charge related to recalculating the value of tax assets due to U.S. legislation and a $3-billion charge for repatriating overseas profits.

Revenues were up 1 percent year-over-year to $17.26 billion, roughly in-line with estimates.

Global consumer banking revenues climbed 6 percent, while the institutional clients group recorded a 1-percent revenue drop, with equity and FICCI revenues declining 18 percent and 23 percent, respectively.

Stock Reaction: Citi's stock, which had already traded up 1.7 percent on Jan. 12, reacted to the earnings with a modest 0.4-percent move to the upside Jan. 16.

Goldman's First Quarterly Loss In Six Years

Earnings Date: Before the market open Jan. 17.

Goldman Sachs Group Inc (NYSE: GS) reported Q4 earnings per share, excluding tax legislation, of $5.68. On a reported basis, the company reported a net loss of $1.93 billion.

Net revenues fell to $7.83 billion from $8.17 billion in the year-ago quarter.

Among the segments, revenues from the institutional client services segment, which accounts for roughly 30 percent of total revenues, fell 34 percent year-over-year, with FICCI revenues plunging 50 percent and equities revenues receding 14 percent. Investment banking revenue climbed 44 percent.

Stock Reaction: Goldman stock has lost about 3 percent over two sessions since the Jan. 17 earnings release.

JP Morgan Revenues, Earnings Exceed Estimates

Earnings Date: Jan. 12.

JP Morgan reported Q4 adjusted earnings of $1.76 per share against a $1.69-per-share consensus estimate.

The net income fell from $6.73 billion or $1.71 per share in the fourth quarter of 2016 to to $4.23 billion or $1.07 per share.

The reported earnings included a $2.4-billion charge related to the Tax Cuts and Jobs Act.

Revenues came in at $25.45 billion, also ahead of the $25.15-billion Street forecast and higher than the $24.33 billion reported one year ago.

Consumer and community banking revenue climbed 10 percent to $12.07 billion, or 47 percent of total revenue, and commercial banking revenue jumped 20 percent. Corporate and investment banking revenue dipped 12 percent, dragged by a 22-percent decline in markets and investor services.

Stock Reaction: JP Morgan shares rose 1.7 percent on Jan. 12 in reaction to the results.

Morgan Stanley Q4 Beats Street

Earnings Date: Before the market open Jan. 18.

Morgan Stanley (NYSE: MS) reported a Q4 EPS of 84 cents.

On a reported basis, earnings fell to $516 million, or 29 cents per share, compared to $1.51 billion and 81 cents per share one year ago. 

The tax charge amounted to $990 million.

Net revenues rose merely 3 percent to $9.5 billion, with wealth management revenue —46 percent of the total — rising 4 percent. Institutional securities revenues, which account for 48 percent of the total, fell 2 percent.

Analysts, on average, estimated earnings of 77 cents per share on revenues of $9.2 billion.

Stock Reaction: Morgan Stanley shares rose about 0.9 percent on Jan. 18.

Wells Fargo: The Big Bank That Gained From Tax Reform

Earnings Date: Before the market open on Jan. 12.

Wells Fargo & Co (NYSE: WFC) said its Q4 earnings increased from 96 cents per share to $1.16 per share, while the Street estimated earnings of $1.07 per share.

The earnings included a net after-tax benefit of $3.35 billion, or 67 cents per share, from the Tax Cut and Jobs Act.

Revenues came in at $22.05 billion, missing the $22.38-billion consensus estimate.

Stock Reaction: The stock shed 0.7 percent on Jan. 12.

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