Goldman Sachs (GS) crushed Q4 views Tuesday on strong trading and investment banking revenue, while Bank of America (BAC) reported mixed results. Goldman Sachs stock rose, and Bank of America stock fell.
XRivals JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC) reported earnings on Friday. JPMorgan earnings and revenue both beat views, while Citigroup and Wells Fargo missed on sales.
Goldman Sachs Earnings
Estimates: Wall Street expects Goldman Sachs earnings to jump 49% to $6.99. Revenue is seen dipping 3% to $9.65 billion.
Results: EPS of $12.08 on revenue of $11.74 billion. Fixed income trading revenue rose 6% to $1.88 billion, and equities trading revenue jumped 40% $2.39 billion. Investment banking revenue surged 27% to $2.61 billion. Asset management revenue climbed 7% to $3.21 billion. Wealth management revenue increased 17% to $1.65 billion.
Stock: Shares rose rose 0.5% to 302.80 on the stock market today. Goldman Sachs stock hit a record high of 309.41 last week. Rival Morgan Stanley (MS), which reports earnings on Wednesday, climbed 1.1%.
CFRA analyst Ken Leon has said banks that make more money from stocks and bonds were likely to fare better than banks more tied to interest rates and businesses hit hard by the pandemic, like consumer banking and commercial real estate.
On Friday, JPMorgan reported fixed income trading revenue grew 15% to $4 billion, as equity trading revenue jumped 32% to $2 billion.
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Bank Of America Earnings
Estimates: Wall Street expects Bank of America earnings per share to fall 24% to 56 cents. Revenue was seen sliding 9% to $20.4 billion.
Results: Bank of America earnings declined to 59 cents a share on $20.2 billion in revenue. Net interest income dropped 16% to $10.3 billion. Consumer banking revenue fell 13% to $8.2 billion. Wealth management revenue eased 5% to $4.7 billion. Global banking revenue slipped 7% to $4.8 billion. Fixed income trading revenue declined 5% to $1.7 billion, while equities trading revenue jumped 30% to $1.3 billion.
BofA also said it will buy back $2.9 billion worth of stock, in addition to $300 million to offset stock given to employees.
Stock: Shares fell 0.6% to 32.80 Tuesday. Bank of America stock, which has a Composite Rating of 67, hit a pre-pandemic high last week.
Among the large U.S. bank stocks, Bank of America is the most centered on the U.S. economy. CEO Brian Moynihan said last year that the bank's third quarter would likely "be the bottom" for declines in its net interest income.
"For traders looking to place bets on an economic recovery, Bank of America may be the most levered of the major banks to a 'return to normal' in 2021," GAIN Capital analyst Matthew Weller said in a research note.
Bank Stocks, Coronavirus
CFRA's Leon said in a research note this month that he expected consumer and commercial loan activity to improve this year. He said he saw a "strong IPO pipeline" for this year, helping banks' underwriting businesses. And he said mergers and acquisitions were likely to increase in 2021.
The Federal Reserve has kept interest rates low, and will likely keep them low in the years ahead in an effort to support the economy. Doing so keeps borrowing costs cheap, but hurts banks' profits.
Earlier last year, the Fed suspended banks from buying back shares and capped dividends. However, last month, it said banks, starting in the first quarter, would be able to buy back stock.
But it said the repurchases and dividends would be "limited to an amount based on income over the past year." Banks that aren't profitable can't issue either under the new rules.
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