Will Bank of America Pull a Citigroup or a JPMorgan Chase Tomorrow?

Bank of America will report its Q1 results on Wednesday. Is the mighty lender set to top expectations like Citigroup and Wells Fargo, or disappoint the market as JPMorgan Chase did last Friday?

Apr 15, 2014 at 2:00PM

Batter up! Tomorrow, Bank of America (NYSE:BAC) will be the last of the big four incumbent banks to report Q1 earnings. Investors will naturally be hoping that the bank makes like Citigroup (NYSE:C), and brings in a quarter exceeding the current modest expectations of the market. Of course, shareholders will positively rejoice in the very unlikely event that the company notches a new record for quarterly earnings per share, as Wells Fargo (NYSE:WFC) did when it reported last week.

Worries are, of course, that instead of smashing an extra-base hit like Citigroup or a big home run like Wells Fargo, Bank of America will whiff a la JPMorgan Chase (NYSE:JPM), which fell well short of EPS estimates when it reported this past Friday. 

At the moment, alas, it seems as if Bank of America will do modestly at best -- the lender has warned that it'll take a $3.7 billion hit to its pre-tax income due to its recent vault-busting settlement with the Federal Housing Finance Agency. This equates to $0.21 per share, which is a painful hit  -- Bank of America's EPS figure for its solid Q4 2013 was $0.29.

And there will be more where that came from in future quarters. Last week the lender shook hands on another legal settlement, this time over allegations from the Consumer Financial Protection Bureau that it was more than a bit slippery when selling credit card add-on products to its customers.

The price tag for that arrangement will be $772 million, most of which will take the form of refunds to the affected customers. Now, that figure isn't huge compared to the $3.7 billion of the FHFA arrangement, but it's significant when we consider that it equates to $0.07 per share. Those pennies could be put to much better use beefing up EPS, or as part of a future dividend increase or share buyback program.

On the bullish side, diminished expectations could be a good thing for Bank of America this quarter. Look what happened to Citigroup -- few were expecting anything much from the bank, which couldn't seem to put a foot right following the Fed's objection to its capital allocation plans last month (Citi was one of only five of 30 tested banks to get the red light). But Citigroup convincingly beat estimates, and yesterday its stock saw a nice lift, at least temporarily rewarding investors who believe in its future.

At the moment, analysts are expecting a per-share profit of $0.05 for Bank of America for Q1.A nickel ain't much, so a beat by even $0.01 or $0.02 would probably be considered a win by the market. Can the bank put some wood on that ball and knock out a hit? It did so in its Q4; investors are crossing their fingers that this at-bat will be similarly productive.

Big banking's little $20.8 trillion secret
There's a brand-new company that's revolutionizing banking, and is poised to kill the hated traditional brick-and-mortar banks. That's bad for them, but great for investors. And amazingly, despite its rapid growth, this company is still flying under the radar of Wall Street. To learn about about this company, click here to access our new special free report.


Eric Volkman has no position in any stocks mentioned. The Motley Fool recommends Bank of America and Wells Fargo, and owns shares of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers