Earnings Season Preview: What to Expect From Banks

With JPMorgan Chase (NYSE: JPM  ) reporting mixed results Thursday, earnings season for banks has officially arrived.

Since the massive financial crisis bottomed out in late 2008, the financial sector has rebounded spectacularly, though growth has slowed quite a bit in recent quarters:

Sources: S&P data and author's graphical design chops.

Sources: S&P data and author's graphical design chops.

So how are individual banks doing, and what do analysts expect of them this quarter? Let's take a look:

Company Name

Expected Reporting Date

Expected EPS

Year-Ago EPS

Reported EPS Last Quarter

% Surprise Last Quarter

Citigroup (NYSE: C  ) Oct. 17  $0.99  $0.72  $1.09 11%
Wells Fargo (NYSE: WFC  ) Oct. 17  $0.69  $0.60  $0.70 3%
Bank of America (NYSE: BAC  ) Oct. 18 ($0.90) ($0.77) ($0.90) NM
US Bancorp (NYSE: USB  ) Oct. 19  $0.53  $0.45  $0.60 13%
PNC (NYSE: PNC  ) Oct. 19  $1.47  $2.07  $1.67 14%
Fifth Third Bancorp (Nasdaq: FITB  ) Oct. 20  $0.27  $0.22  $0.35 30%
Huntington Bancshares (Nasdaq: HBAN  ) Oct. 20  $0.15  $0.10  $0.16 7%
Regions Financial (NYSE: RF  ) Oct. 25  $0.05 ($0.17)  $0.04 NM
Synovus (NYSE: SNV  ) Oct. 27 ($0.07) ($0.25) ($0.07) NM

S&P Capital IQ. NM = not meaningful.

A few names, including Bank of America and Synovus, are still struggling with the aftermath of the financial crisis. But by and large, banks have had surprisingly strong earnings in recent quarters, largely on the backs of improving credit quality and declining provisions for loan losses.

But growth is getting harder and harder to come by. You can't reduce provisions indefinitely -- particularly at the major banks involved in the massively-costly-and-still-unfolding foreclosure fraud scandal. And revenue is drying up, because of fewer lending opportunities and new regulations aimed at curbing fees. So while analysts are predicting growth over last year's third quarter, we're starting to see earnings begin to stagnate on a quarter-by-quarter basis.

How are banks responding in such a lukewarm environment? Strategies vary considerably. Some, like JPMorgan, are stressing international growth as a way to compensate for lackluster U.S. loan demand. Others, like Bank of America (and many troubled European banks, for that matter), find themselves having to lay off workers.

It'll be fascinating to follow the next chapter in the desperate saga of banks' attempts to maintain their record earnings in the aftermath of a burst credit bubble.

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Ilan Moscovitz doesn't own shares of any company mentioned. You can follow him on Twitter, where he goes by @TMFDada. The Motley Fool owns shares of JPMorgan Chase, PNC Financial Services Group, Citigroup, Wells Fargo, Bank of America, Huntington Bancshares, and Fifth Third Bancorp. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (3) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 15, 2011, at 10:22 PM, prginww wrote:

    I believe banks will rebound this week because Euro zone is better now.

  • Report this Comment On October 16, 2011, at 2:04 AM, prginww wrote:

    Citigroup is one of the strongest banks now, so their earnings Monday will be a big indicator of what to expect from the sector.

  • Report this Comment On October 18, 2011, at 3:30 PM, prginww wrote:

    Citibank sucks! NO deal there!

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