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Bank of America Stock Lower as Bank Earnings Approach

By John Maxfield - Apr 11, 2013 at 12:59PM

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The big issue for bank investors over the next two weeks is how well the nation's largest lenders performed in the first quarter of the year.

Unless something completely unforeseen happens -- which, of course, is always possible -- the focus of bank investors will be all earnings all the time over the next few weeks. The nation's first and fourth largest banks by assets kick things off this Friday, when JPMorgan Chase (JPM -1.71%) and Wells Fargo (WFC -3.66%) report their results from the first three months of the year. Bank of America (BAC -3.08%) and Citigroup (C -3.39%) follow suit next week.

Bank investors got their first glimpse of what first-quarter earnings might look like today when Commerce Bancshares (CBSH -2.06%) reported its results. Shares of the Kansas City-based bank are trading sharply lower after its earnings per share fell by 4.3% on a year-over-year basis.

The culprit for the fall in profit was interest rates. As Commerce's prepared remarks noted, "Low interest rates, affecting both loans and investments, coupled with a decline in interest on our inflation-protected government securities of $4.8 million, resulted in a decline in net interest income of $10.9 million from the previous quarter."

Alternatively, the good news was that noninterest income grew on a number of fronts. Among others, bank card transaction fees increased 11%, and trust fees were up 10%. Both bode well for the larger banks -- and particularly Bank of America -- which have sizable debit and credit card operations and wealth management divisions. Though, it's worth noting, Commerce isn't necessarily representative of larger money center banks that also look to volatile trading operations for a significant portion of revenue.

In other news, CEOs of the nation's largest banks are meeting with President Obama this evening for a regularly scheduled quarterly get-together of financial leaders. As Erik Schatzker of Bloomberg noted, the timing is particularly auspicious given the expectation that these lenders earned record profits in the first three months of 2013. It's predicted, for instance, that the six largest banks in the country earned more than $20 billion over this time period.

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Stocks Mentioned

Bank of America Corporation Stock Quote
Bank of America Corporation
BAC
$34.88 (-3.08%) $-1.11
Citigroup Inc. Stock Quote
Citigroup Inc.
C
$49.32 (-3.39%) $-1.73
JPMorgan Chase & Co. Stock Quote
JPMorgan Chase & Co.
JPM
$120.09 (-1.71%) $-2.09
Wells Fargo & Company Stock Quote
Wells Fargo & Company
WFC
$42.11 (-3.66%) $-1.60
Commerce Bancshares, Inc. Stock Quote
Commerce Bancshares, Inc.
CBSH
$67.18 (-2.06%) $-1.41

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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