Wednesday, January 20, 2016

BAC Q4 earnings

Bank of America Corporation reported fourth quarter earnings per share of $0.28, beating the street estimates of $0.26 on January 19th. They reported revenue of $19.53B, which is a 4.3% increase Y/Y. However, the revenue missed estimates by $250M. The stock initially had a positive reaction, but since then the market sell off has affected the price. Although some analyst say BACs expenses remain too high, they are headed in the right direction, finally being able to move past most of their legal problems from the recession. The company is becoming more efficient, improving their efficiency ratio from 88% in 2014 to 68% in 2015. As they lower their expenses it will improve further.
The bank makes most of its money from net interest income and non-interest income. We saw net interest income grow in Q4 2015 to $10.5B from $10.3B in Q3 2015, and $10.4B Q4 2014. Non-interest income was also up to $9.7B, a 7% increase Y/Y. As for consumer benefits, CEO Brian Moynihan says spending on credit and debit cards rose 4% Y/Y, but without the oil decline, it would have risen 5.7%. Putting a dollar number on it, that's $20M per day in savings to the bank's credit and debit card customers.

With interest rates rising, that can only help the NII, and the largest banks will see some gains. BAC saw their best year for earnings since the Great Recession.

Sunday, January 17, 2016

Citigroup Beats Estimates for Fourth Consecutive Quarter; Stock Falls on Global Uncertainty

Citigroup posted a fourth quarter earnings per share (excluding impact of CVA/DVA) of $1.06 beating consensus estimates of $1.05, on January 15th.  This EPS disclosure represents just below a 17-fold increase from Q4 2014, when the company posted a $0.06 EPS, due mainly to absorbing legal and repositioning costs. This marks the fourth consecutive quarter that Citigroup surpassed EPS estimates. Citi posted top-line revenue of 18.64 billion for Q4 2015, surpassing estimates of $17.87 billion. 2015 saw annual earnings per share of $5.35.

Broken down, Citi saw Investment Banking and Fixed-Income, Currencies & Commodities revenues exceed expectations for Q4, whereas Equity revenue missed estimates by $165 million.  With the closing of their fiscal year Citi saw their annual net income amount to $17.1 billion. This not only represents more than a 130% increase YoY, but also marks the highest annual net income for Citi since 2006. Citi’s expenses as a percentage of revenue decreased to 57% for 2015 from 65% in 2014. This stems from Citi’s devotion to cutting unnecessary costs and repositioning itself to better suit its environment, along with the continued uptick of the US economy following the 2007 Housing Crisis.

Although the disclosure was almost all positive the share price tumbled 7% on the day to $42.47 at the week’s closing. This comes on the back of news relating to the uncertainty of the Chinese markets and the lowest oil prices seen since 2003. Citi is very exposed to China, asset-wise, causing shareholders to weigh the positive earnings news with the current global landscape. Citi was not the only victim of the current market situation, as the Dow, NASDAQ, and S&P all finished firmly in the red on Friday.

It looks as though Citi is in a good financial situation, moving forward into 2016. They are repositioned and look primed to increase revenues again next year. The stock continues to be very undervalued, currently at $42.47/share, compared to its end-of-the-year book value of $69.46 and tangible book value of $60.61. Hopefully, 2016 sees an end to the instability in the Chinese and oil markets, and an increase in revenues due to hiked interest rates. Regardless, we must keep a close eye on the situation as the stock is down almost 12% since January 1st, 2016.

Saturday, January 16, 2016

PNC Closes 2015 Out Strong; China & Oil Weigh on Markets

PNC posted diluted earnings per share of $1.87 which surpassed Street estimates of $1.80. This represents an earnings surprise of 3.9% and growth of 1.6% from the same quarter in the prior year. Results were mainly driven by lower expenses, which unfortunately were offset by lower revenues and higher provisions for credit losses and net charge offs. Despite the positive report, the results were masked by worries in China and oil with each of the main indices down at least 3% in intraday trading. PNC closed the week at $86.36.

Revenue for the quarter came in at $3.85 billion which was down 2.4% from the prior year. The decline was mostly due to a fall in non-interest income but the figure still beat on consensus revenue estimates. Net income in the Retail Banking, Asset Management Group and Non-Strategic Assets Portfolio increased 23.8%, 13.3%, and 23.3%, respectively, from the prior year’s quarter. Net income in the Corporate & Institutional Banking and Other segments declined 4.4% and 33%, respectively.

Net interest income for the quarter was down 0.2% year over year due to lower purchase accounting accretion, despite an increase in core net interest income. PNC’s net interest margin decreased 19 bps to 2.70%. Net charge offs increased 2% year over year to $120 million and provision for credit losses rose 42% to $74 million.

In the quarter, PNC repurchased 5.8 million common shares for $0.5 billion. As of December 31st Basel III common equity tier 1 ratio was 10.7%. Total assets were $358.5 billion, up 3.9% year over year. Total loans and total deposits increased 0.9% and 7.2%, respectively.