What to expect ahead of Big Banks Q1 24 earnings

🌟🌟🌟Even though there was a solid 1% rebound on Friday, the Dow Jones Industrial Average fell nearly 2% across last week, marking its worst weekly performance since October last year.  Nervousness has increased across the markets after several Feds officials including Jerome Powell, confirmed that patience is required before cutting interest rates given the strength of the US economy and the slight increase in inflation.  Rising geopolitical tensions also affected risk sentiment.

This week, volatility could rise after 5 straight monthly gains with the release of US inflation figures, the minutes of the March FOMC meeting and the start of US earnings season.

Q1 24 earnings season kicks off on Friday with JP Morgan, Wells Fargo and Citibank reporting. 

$JPMorgan Chase(JPM)$  is the largest US Bank with USD 39 Trillion in Assets as at the end of 2023.  JPM currently trades around all time highs ahead of earnings.  JPM widened its lead on its rival banks after posting record profits in 2023.  Net Interest Income or NII is expected to remain strong as growth in its loan portfolio is expected to offset a margin squeeze, as high interest rates mean more money is paid out to deposit holders.

However the broadly stable macro backdrop and record high stock markets could mean more solid results from JPM.  Bad loan provisions will be in focus and could provide further insight into the broader health of the US economy.  JPM is a diversified bank which puts it in a favourable position compared to its competitors. 

Performance wise, JPM has risen 15% year todate and in 2023, JPM has jumped 55%.

JPM is scheduled to release its Q124 earnings on April 12 2024.  Expected Earnings per share is USD 4.17.  Expected revenue is USD 41.99 billion. 

JPM has a Buy rating, Target price of USD 204.00, an upside potential of 3%.

$Wells Fargo(WFC)$  has risen 17% year todate, outperforming the broader market.  The share price has been helped by the removal of restrictions on the bank after several scandals, including how it sold financial products to customers.  The restrictions have been in place since 2016.

Wells Fargo fell after its Q423 earnings disappointed with profit falling 6% year on year while revenue rose 2%.  Net Interest Income fell 5%.  Wells Fargo warned of weaker net interest margins in 2024.  Expectations are for adjusted profit to fall 11% and revenue drop 2%.  Bad loan provisions were up 34% in Q423 and could remain high.  Wells Fargo has a larger exposure to commercial real estate than its peers.  Wells Fargo has been shoring up its provisions amid worries of a looming commercial real estate crisis.

Performance wise Wells Fargo has risen 17% year todate and in 2023 the bank is up by 49%.

Wells Fargo Earnings release date is April 12.  Expected EPS is USD 1.08.  Expected revenue is USD 20.19 billion.

Wall Street Analysts are bullish on Wells Fargo with a Buy rating, Target price of USD 60.88, an upside potential of 5%.

$Citigroup(C)$  fell 2% after Citibank reported a net loss of USD 1.8 billion for Q423.  Full year 2023 results of USD 9.2 billion were down 38% over the prior year.  Earnings were materially impacted by the USD 4.7 billion in non recurring items.  According to Fitch ratings, these non recurring items do not refect on Citi's core earnings power nor execution against its strategic goals.

Citi is in the process of restructuring and incurred a higher than expected USD 780 million restructuring charge for its workforce reduction in support of its strategic transformation.

Performance wise Citi is up 16% year todate and in 2024, Citi has risen 32%.

Citi will release its Q124 earnings on April 12.  Expected EPS is USD 1.20.  Expected revenue is USD 20.38 billion.

$Bank of America(BAC)$  shares fell 1.1%% after it reported its Q423 earnings.  BAC  said that its net income  fell to USD 3.1 billion or 35 cents per share in Q4, down more than 50% from USD 7.1 billion or 85 cents per share in the previous year.

BAC' s earnings were affected by hefty one time charges  which included the special USD 2.1 billion fee charged by the Federal Deposit Insurance Corporation.  The fee is tied to the failures of Silicon Valley Bank and Signature Bank.  BAC was also hit by a pretax charge of USD 1.6 billion related to the transition away from the London Interbank Offered Rate.

Performance wise BAC is up 10% year todate.  In 2023 BAC has risen by 34%.

Wall Street Analysts are bullish on BAC with a Buy rating, Target price of USD 38.86, an upside potential of 3%.

BAC earnings release date is April 16.  Expected EPS is 77 cents.  Expected revenue is USD 25.46 billion. 

JPM, Wells Fargo, Citibank and Bank of America are the Big 4 Banks in the US.  They are the largest banks in the US as well as among the world's top banks by market capitalisation.  JP Morgan is currently the most valuable bank globally.  These banks are the bellwether of the US economy.  As they report their Q124 earnings,  their earnings will reflect the state of the US economy.

The latest non farm payroll report and macro data have shown a resilient US economy and robust economic activity which will benefit the banks.  However with inflation still sticky it is important to weigh the impact of higher interest rates for longer on net interest income of the banks.  

This is an exciting week in the US markets.  Let's hope the Bull markets will prevail. 

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