With large U.S. banks among the first to report Q1 earnings, investors will be watching to see how the banking sector is faring a year after the turmoil of March 2023. The amount of FDIC special assessments is now known, and from incoming data, the economy remains resilient.
Provisions for credit losses also provide a window into how well banks expect the economy to hold up.
Guidance for the year may be almost as important as Q1 results. Since the beginning of the year, markets have factored in fewer rate cuts for 2024 — from six at the beginning of the year to about three by the end of Q1. That will support banks' net interest income, but may keep a lid on their businesses tied to mergers & acquisitions and capital markets activity.
Tracking NII gains
"Along with a healthy U.S. economic with GDP growth, this would drive potentially higher Y/Y gains in total NII for these banks," said CFRA analyst Kenneth Leon in his Q1 preview for global U.S. banks. Net interest income is significant for Bank of America (NYSE:BAC), Citigroup (NYSE:C), and JPMorgan (NYSE:JPM), but less so for Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS), he said.
Banks are set to start reporting Q1 2024 earnings on Friday, April 12, with JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (NYSE:WFC). Goldman Sachs (GS) will follow on Monday, then Morgan Stanley (MS) and Bank of America (BAC) report on Tuesday, April 16.
CFRA's Leon sees JPMorgan Chase (JPM) and Goldman Sachs (GS) having the best chances to beat consensus in Q1 0224, followed by Morgan Stanley (MS).
"Global U.S. banks are likely to see a sequential improvement in March versus December results, but year-over-year comparisons are likely to be flat or lower," he wrote in a note to clients.
Q1 2024 EPS revision trends | |||||||
Q1 EPS consensus | Q4 EPS | Q1 2023 EPS | 1M trend | 3M trend | 6M trend | ||
Bank of America | BAC | $0.77 | $0.70 | $0.94 | 0.38% | -0.52% | -1.66% |
Citigroup | C | $1.27 | $0.84 | $1.86 | -10.95% | -20.68% | -19.20% |
Goldman Sachs | GS | $8.64 | $5.48 | $8.79 | -2.10% | -3.00% | -5.52% |
JP Morgan Chase | JPM | $4.13 | $3.97 | $4.10 | -0.58% | -2.44% | 4.12% |
Morgan Stanley | MS | $1.65 | $1.13 | $1.70 | -1.02% | -1.48% | -12.49% |
Wells Fargo | WFC | $1.09 | $1.29 | $1.23 | -1.06% | 0.45% | 6.71% |
Note: EPS figures are non-GAAP, if available |
Here's what to look for:
JPMorgan Chase (JPM) is expected to earn $4.13 per share in Q1, an increase from $3.97 in the previous quarter and $4.10 in Q1 2023. The Visible Alpha average analyst estimate for net interest income, at $23.1B, reflects a dip from $24.05B in Q4 2023 and an increase from $20.7B in the year-ago quarter.
JPMorgan Chase (JPM) is expected to earn $4.13 per share in Q1, an increase from $3.97 in the previous quarter and $4.10 in Q1 2023. The Visible Alpha average analyst estimate for net interest income, at $23.1B, reflects a dip from $24.05B in Q4 2023 and an increase from $20.7B in the year-ago quarter.
Keep an eye, too, on JPMorgan's (JPM) guidance in its earnings slides. In January, it expected full-year NII of ~$90B, or ~$88B excluding Markets, compared with $89.3B in 2023. By comparison, the Visible Alpha estimate is $90.6B.
- Citigroup's (C) Q1 EPS consensus of $1.27 indicates earnings will improve from $0.84 in Q4 but decline from $1.86 in Q1 2023.
Watch for changes in its 2024 revenue guidance, which was $80B-$81B when it issued its Q4 2023 results and compares with the Visible Alpha consensus of $80.2B.
- Wells Fargo (WFC): Q1 EPS consensus of $1.09 suggests a decline from $1.29 in Q4 2023 and $1.23 in Q1 2023. The Visible Alpha consensus for Q1 net interest income is $12.3B, down from $12.8B in Q4 2023.
With markets expecting fewer rate cuts, it's likely Wells Fargo will adjust its 2024 guidance, which had expected net interest income to drop 7%-9% from 2023's $52.4B level.
- Goldman Sachs (GS) is expected to earn $8.64 per share in Q1, up from $5.48 in the prior quarter and down from $8.79 in the year-ago period.
In March, CFRA upgraded Goldman to Buy, partly on green shoots in capital raising and M&A. Investment banking fees are expected to come in at $1.79B in Q1, according to the Visible Alpha estimate, up from $1.65B in Q4 2023 and $1.58B in Q1 2023.
- Bank of America (BAC): Q1 EPS consensus of $0.77 expects an increase from $0.70 in the previous quarter and a drop from $0.94 in the year-ago period.
SA Analyst Noah's Arc Capital Management expects that Q1 results "will shed a favorable light on Bank of America's ability to sustain strong NII revenue with interest rates at or near their peak."
BofA's (BAC) Q1 net interest income (fully tax equivalent) is estimated to be $14.0B, down from $14.1B in Q4 and $14.6B in Q1 2023.
- Morgan Stanley (MS) is seen earning $1.65 per share in the first quarter of 2024, according to the consensus, compared with $1.13 in the prior quarter and $1.70 in the year-ago quarter.
With its acquisitions of E*Trade in 2020 and Eaton Vance in 2021, wealth management makes up the biggest segment in Morgan Stanley's portfolio. Visible Alpha consensus suggests that that segment's revenue, net of interest expenses, will increase to $6.71B from $6.65B in Q4 2023 and $6.56B in Q1 2024.
Earnings calendar
Friday, April 12: JPMorgan (JPM), Wells Fargo (WFC), Citigroup (C), State Street (STT)
Monday, April 15: Goldman Sachs (GS), Charles Schwab (SCHW), M&T Bancorp (MTB)
Tuesday, April 16: Bank of America (BAC), Morgan Stanley (MS), PNC Financial Services (PNC), Bank of New York Mellon (BK), Northern Trust (NTRS), Commerce Bancshares (CBSH), Hancock Whitney (HWC)
Wednesday, April 17: U.S. Bancorp (USB), Discover Financial (DFS), Citizens Financial Group (CFG), First Horizon (FHN), Wintrust Financial (WTFC), Synovus Financial (SNV)
Thursday, April 18: KeyCorp (KEY), Ally Financial (ALLY), Comerica (CMA), Western Alliance Bancorporation (WAL)
Friday, April 19: American Express (AXP), Fifth Third Bancorp (FITB), Huntington Bancshares (HBAN), Regions Financial (RF)
Monday, April 22: Trust Financial (TFC)