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Bank gains are coming. Here is what to expect.



Photography by Alastair Pike / AFP / Getty Images


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The earnings season begins this week with the largest US banks reporting their second quarter results.

After being hammered in the fourth quarter of last year, bank shares recovered sharply in 2019. The first bank in
Citigroup

(ticker: C), is up 38% this year, compared with about 20% for all
S & P 500
index.

Bank of America

(BAC) increased by 20%, while
Goldman Sachs

(GS) stock is up 28%.
JPMorgan Chase

(JPM) gained 18% and
Morgan Stanley

(MS) is up 13%.
Wells Fargo

(WFC), still subject to a balance sheet ceiling imposed by the Federal Reserve and without a permanent general manager, increased by only 3%.

Despite the recovery of their activities at the end of 2018, it is difficult to see the current environment as being positive. Fed turnaround, continuation of US-China trade war, fears of economic slowdown, likely decline in investment banking revenue and seemingly secular decline in profits should limit the actions of the big banks.

Here's a summary of what Wall Street expects of the big banks for this season's results, as well as recent history.

Citigroup

Citigroup publishes its results Monday before the market opens and holds a conference call with investors at 10 am ET.

Wall Street expects Citigroup to realize a turnover of $ 18.5 billion and a profit of $ 1.81 per share.

The bank has important activities abroad, particularly in Asia, which has led some to fear that the trade war is weighing on its results. Others argued that Citi's deep ties with Asian economies would enable it to do well if western firms outsourced their supply chains from China to other countries in the region. The shares could also rise if the company looks set to meet its target of 13.5% return on equity for 2020 set for 2020, wrote Richard Ramsden, Goldman Sachs analyst, in May.

Goldman Sachs

Goldman Sachs announces its results Tuesday before the market opens and has a call at 9:30 pm (ET) with investors. Analysts expect the bank to publish a turnover of $ 8.9 billion and earnings per share of $ 4.99, according to FactSet.

The bank's shares were shaken last year by the 1MDB scandal, the biggest blow to reputation since the financial crisis. (Goldman Sachs has always denied wrongdoing and has declared cooperation with regulators and law enforcement.)

The resolution of the case, most likely through a settlement, is the first major challenge to David Solomon's mandate as Executive Director and constitutes the bulk of the unresolved news that weighs on the actions of the bank. The bank also said it would increase its dividend.

Wells Fargo

Wells Fargo also announced a profit Tuesday before the bell, followed by a teleconference at 10 am ET. The consensus is that the bank generates $ 20.8 billion in revenue and reports a profit of $ 1.17 per share.

The company remains under the sanctions of the Federal Reserve because of its mismanagement of the false accounts receivable scandal. He also remains without a permanent leader, after Tim Sloan's surprise departure in March.

JPMorgan Chase

JPMorgan also announced Tuesday before market opening and will hold a teleconference at 8:30 am ET. The latter is expected to generate revenue of $ 28.8 billion and earnings per share of $ 2.50. Barron argued that the bank's shares were undervalued, given its enviable capital position, remarkably stable profitability and dominance in a range of financial products.

Bank of America

Bank of America publishes its results on Wednesday before the bell and holds a conference call with investors at 8:30 am ET. Analysts expect Bank of America to release earnings per share of 71 cents for a turnover of $ 23.1 billion. Pay particular attention to the bank's cost reduction initiative.

Morgan Stanley

Morgan Stanley announces its results Thursday before the market opens and is holding a teleconference at 8:30 am EST. The bank is expected to generate a turnover of $ 10 billion and earnings per share of $ 1.14. Like Goldman Sachs, Morgan Stanley is about to increase its dividend.

Write to Ben Walsh at ben.walsh@barrons.com


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