Dimon Will Go First in ‘Fire Hose’ Deluge of U.S. Bank Earnings

(Bloomberg) -- There will be a lot to watch when bank earnings kick off on Tuesday morning, with reports from JPMorgan Chase & Co., Goldman Sachs Group Inc., Citigroup Inc., Wells Fargo & Co. and money manager BlackRock Inc. all set to hit at or before 8 a.m.

The unusual flood of reports from the biggest banks comes amid interest rate volatility and IPO stumbles along with market-moving trade and geopolitical developments. The ever-present risk President Donald Trump might upend everything with a fresh tweet has been compounded in recent days as investors eye the trade war with China and a conflict in the Middle East.

Adding to the fog on Tuesday: It’s unclear whether analyst earnings-per-share estimates will include write-downs for banks’ holdings in other publicly traded companies, like JPMorgan’s and Goldman’s stakes in Tradeweb Markets Inc., Goldman’s stake in Uber Technologies Inc., and JPMorgan’s relationship with WeWork.

Tuesday will be like “drinking from a fire hose,” Wolfe analyst Steven Chubak said in a phone interview. He’s betting JPMorgan’s release and CEO Jamie Dimon’s comments will garner increased attention, because the bank’s results hit first -- around 6:45 a.m. -- and investors will have extra time to ponder JPMorgan before Goldman, Citi and Wells come out.

During the morning crunch, investors should focus on “mitigating factors” like market share capture for JPMorgan and Goldman Sachs and cost cuts for Citigroup and Wells Fargo, Bloomberg Intelligence’s Alison Williams suggested. That’s particularly important as there’s little clarity on interest rates, she said.

“Costs are relatively more critical for Citi as the incoming Wells Fargo CEO may re-base targets and tweak strategy,” she said. “Market share opportunities should support JPMorgan, but progress is more important for Goldman’s trading and fees in the third quarter.”

Wolfe’s Chubak will keep a close on loans and credit updates. He expects a noisy quarter for Wells Fargo, and will listen for comments on Goldman’s credit card with Apple. He’ll also be on the lookout for comments on turmoil in the repo market and for any responses to potential questions about the 2020 elections and Sen. Elizabeth Warren’s agenda.

The Federal Reserve has been injecting liquidity into the funding markets since Sept. 17, and will continue to do so through the end of the year. It announced on Friday that it will buy $60 billion per month in Treasury bills at least through the second quarter of 2020 to add reserves back into the system to a level of abundance policy makers desire. Officials had attributed the volatility in the funding markets to a drop in bank reserves below ample levels.

Keep an eye on “the impact in the noise,” said Alan McKnight, chief investment officer in wealth management at Regions Bank, with about $45 billion in assets under management. He will be listening to bank executives’ comments on loan trends and capex for signals about where the economy may be heading. McKnight also plans to cross-check those comments with remarks from managers at industrial and tech companies later in the earnings season, he said in an interview.

On Friday, Bank of America analyst Erika Najarian said bank share performance may be fueled more by macro-economics than by earnings. It will be a case where “macro trumps micro,” Najarian wrote, arguing that macro factors may be more impactful than the “well understood” industry-level fundamentals.

She flagged “outlier” banks, including: JPMorgan, which is rarely a volatile stock during earnings, as investors have been asking about lending exposure to WeWork; Wells Fargo, as appointing Charlie Scharf as CEO may have put a floor under shares, and Citigroup, which is facing a “crucial” quarter for its target of cutting expenses to meet its 2020 efficiency guide of about 53%.

On Monday, bank shares rose, with the KBW bank index gaining as much as 0.3%. Top index gainers included KeyCorp, Northern Trust Corp., Fifth Third Bancorp, and Bank of America Corp.

Here’s what analysts are expecting:

JPMorgan
ESTIMATES

• 3Q adjusted EPS estimate $2.46 (range $2.32 to $2.54) (Bloomberg Data)
• 3Q adjusted revenue estimate $28.47 billion (range $27.99 billion to $29.23 billion) (BD)
• 3Q FICC sales & trading revenue estimate $3.09 billion (Bloomberg MODL).
  • 3Q equities sales & trading revenue estimate $1.68 billion (MODL)
  • 3Q investment banking revenue estimate $1.80 billion (MODL)
• 3Q net yield on interest-earning assets estimate 2.42% (range 2.37% to 2.45%) (BD)
• Bloomberg Intelligence, Oct. 11: JPMorgan Share Gains, Opportunity Eyed Amid Rates: 3Q Preview

DATA

• 12 buys, 16 holds, 1 sell
• Avg PT $120.75 (3.9% upside from current price)
• Implied 1-day share move following earnings: 2.5%
• Shares fell after 7 of prior 12 earnings announcements
• Shares up 1.6% in past 5 days vs SPX Index up 1.0%
• Shares up 8.7% in past year vs SPX Index up 7.3%

TIMING

• Earnings release expected at about 6:45am (New York time) Oct. 15
• Call 8:30am (New York time), (866) 541-2724
• Conference call website

Goldman Sachs
ESTIMATES

• 3Q adjusted EPS estimate $4.86 (range $4.25 to $6.01) (Bloomberg data)
• 3Q net revenue estimate $8.31 billion (range $8.03 billion to $8.69 billion) (BD)
• 3Q equities sales & trading revenue estimate $1.82 billion (Bloomberg MODL).
  • 3Q FICC sales & trading revenue estimate $1.35 billion (MODL)
  • 3Q investment banking revenue estimate $1.80 billion (MODL)
• Bloomberg Intelligence, Oct. 11: Goldman Trading Boost, Equity-Fee Views Are Focus: 3Q Preview

DATA

• 11 buys, 12 holds, 2 sells
• Avg PT $236 (14.7% upside from current price)
• Implied 1-day share move following earnings: 3.3%
• Adjusted EPS beat estimates in 11 of past 12 quarters
• Shares up 2.7% in past 5 days vs SPX Index up 1.0%
• Shares down 3.8% in past year vs SPX Index up 7.2%
• Quarter dividend BDVD est. $1.25 per share, year ago reported 80c; next declaration date Oct. 15, 2019

TIMING

• Earnings release expected 7:30am (New York time) Oct. 15
• Call 11am (New York time), 1-888-281-7154
• Conference call website

Citigroup
ESTIMATES

• 3Q EPS estimate $1.95 (range $1.86 to $2.03) (Bloomberg data)
• 3Q adjusted revenue estimate $18.54 billion (range $18.28 billion to $18.76 billion) (BD)
• 3Q FICC sales & trading revenue estimate $3.06 billion (Bloomberg MODL).
  • 3Q equities sales & trading revenue estimate $776.0 million (MODL)
  • 3Q investment banking revenue estimate $1.12 billion (MODL)
• Bloomberg Intelligence, Oct. 10: Citigroup’s Cost Control Critical to ROTCE Target: 3Q Preview

DATA

• 24 buys, 2 holds, 1 sell
• Avg PT $81.67 (16.3% upside from current price)
• Implied 1-day share move following earnings: 3.4%
• Adjusted EPS beat estimates in 12 of past 12 quarters
• Shares up 3.1% in past 5 days vs SPX Index up 1.0%
• Shares up 0.6% in past year vs SPX Index up 7.2%
• Quarter dividend BDVD est. 51c per share, year ago reported 45c; next declaration date Oct. 17, 2019

TIMING

• Earnings release expected 8am (New York time) Oct. 15
• Call 10am (New York time), (866) 516-9582 password: 9968118
• Conference call website

Wells Fargo
ESTIMATES

• 3Q EPS estimate $1.14 (range $1.04 to $1.19) (Bloomberg data)
• 3Q net interest income estimate $11.75 billion (range $11.64 billion to $11.99 billion) (BD)
• 3Q net interest margin estimate 2.69% (range 2.66% to 2.74%) (BD)
• 3Q net charge-offs estimate $744.0 million (BD)
• 3Q provision for credit losses estimate $730.3 million (range $588.0 million to $825.9 million) (BD)
• Bloomberg Intelligence, Oct. 9: Wells Fargo Costs Near-Term Key Ahead of CEO Start: 3Q Preview

DATA

• 10 buys, 17 holds, 5 sells
• Avg PT $50.38 (2.2% upside from current price)
• Implied 1-day share move following earnings: 2.7%
• Shares fell after 10 of prior 12 earnings announcements
• Adjusted EPS beat estimates in 6 of past 12 quarters
• Shares up 1.0% in past 5 days vs SPX Index up 1.0%
• Shares down 5.4% in past year vs SPX Index up 7.2%
• Quarter dividend BDVD est. 51c per share, year ago reported 43c; next declaration date Oct. 22, 2019

TIMING

• Earnings release expected 8am (New York time) Oct. 15
• Call 11am (New York time), 866-872-5161
• Conference call website

BofA

ESTIMATES

• 3Q adjusted EPS estimate 68c (range 64c to 72c) (Bloomberg Data)
• 3Q revenue net of interest expense estimate $22.85 billion (range $22.71 billion to $23.09 billion) (BD)
• 3Q net interest yield estimate 2.39% (range 2.37% to 2.43%) (BD)
• Bloomberg Intelligence, Oct. 11: Rate Risk, Cost Trend Are Focus With BofA Results: 3Q Preview

DATA

• 16 buys, 15 holds, 0 sells
• Avg PT $32.69 (12.4% upside from current price)
• Implied 1-day share move following earnings: 2.7%
• Adjusted EPS beat estimates in 11 of past 12 quarters
• Shares up 2.7% in past 5 days vs SPX Index up 1.0%
• Shares up 2.2% in past year vs SPX Index up 7.3%
• Quarter dividend BDVD est. 18c per share, year ago reported 15c; next declaration date Oct. 23, 2019

TIMING

• Earnings release expected 6:45am (New York time) Oct. 16
• Conference call website

Morgan Stanley
ESTIMATES

• 3Q EPS estimate $1.10 (range 98c to $1.19) (Bloomberg Data)
• 3Q net revenue estimate $9.57 billion (range $9.23 billion to $9.89 billion) (BD)
• 3Q net interest income estimate $969.8 million (range $866.0 million to $1.03 billion) (BD)
• Bloomberg Intelligence, Oct. 14: Morgan Stanley Wealth Margin to Hold; Equities Focus: 3Q Preview

DATA

• 21 buys, 5 holds, 1 sell
• Avg PT $52.74 (25.0% upside from current price)
• Implied 1-day share move following earnings: 3.4%
• Adjusted EPS beat estimates in 11 of past 12 quarters
• Shares up 3.7% in past 5 days vs SPX Index up 1.0%
• Shares down 2.8% in past year vs SPX Index up 7.3%
• Quarter dividend BDVD est. 35c per share, year ago reported 30c; next declaration date Oct. 15, 2019

TIMING

• Earnings release expected 7:30am (New York time) Oct. 17
• Call 8am (New York time), 1-877-895-9527 password: 9079714

For more stories on the third quarter, see:

Five Things to Watch as Big Banks Kick Off Earnings This Week

Most Big Banks’ Third-Quarter Trading Revenue Seen Rising: Chart

Citigroup, Goldman Options Imply Most Post-Earnings Volatility

Look to ‘Outlier’ Banks in a Macro-Driven Quarter, BofA Says

For real-time news and analysis as JPMorgan, Citigroup and Goldman earnings hit and calls unfold, visit TOPLive starting at 6:30 a.m. New York time.

--With assistance from Alexandra Harris, David Tung, Kimberly Yuen and Jenny Surane.

To contact the reporter on this story: Felice Maranz in New York at fmaranz@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Will Daley

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