The Zacks Analyst Blog Highlights: Wells Fargo, JPMorgan Chase, Citigroup, BNC Bancorp and First of Long Island
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Today,
Here are highlights from Tuesday's Analyst Blog:
Big Banks Report – 2 Banking Picks
Top U.S. banks are in the process of releasing first-quarter 2014 results, likely to reflect the tough backdrop endured by the sector since the beginning of the year.
The first to report earnings was Wells Fargo & Company (NYSE:WFC-Free Report), which beat estimates by a decent margin. But numbers from JPMorgan Chase & Co. (NYSE:JPM-Free Report) lagged behind estimates by a wide margin. However, Citigroup Inc. (NYSE:C-Free Report) reported impressive first-quarter 2014 results, following Wells Fargo's lead.
JPM Disappoints
JPMorgan Chase failed to override industry conditions and delivered a negative earnings surprise of 9.2%. The banking giant came out with earnings of
However, it would not be unjustified to blame industry-wide headwinds, as the company was largely unaffected by settlements of legal disputes. A lower level of consumer and corporate activities, soft trading volumes and sluggish mortgage banking dragged earnings this time around. Moreover, fundamental pressure from a low interest rate and sluggish loan growth made matters worse.
WFC Beats
However, Wells Fargo earned
Despite negative market sentiment, shares of Wells Fargo increased marginally in the pre-market session, indicating that investors have been bullish on the results. The price reaction during the trading session will give a fair idea whether Wells Fargo has been able to meet market expectations.
Citibank Impresses
Following a disappointing second-half 2013, Citigroup reported impressive first-quarter 2014 results. Earnings per share came in at
Shares of Citigroup jumped around 3.7% in the pre-market session, indicating that investors have been bullish on the results. The price reaction during the trading session will give a better idea whether Citigroup has been able to meet expectations.
What Did They Get Right?
Both Wells Fargo and Citibank's success was a result of prudent expense management. In Wells Fargo's case total loans and deposits grew. Moreover, a strong capital position and returns on assets and equity acted as the positives. But more importantly, the company recorded reduction in non-interest expenses.
Wells Fargo also reported
Better expense management was the driving force behind Citigroup's better performance as well. Total costs of credit for the first quarter at Citigroup were down 20% year over year to
The Bottom Line
Going forward, expense management may well be the key factor which determines a bank's success and failure. Moreover, reserve releases for most banks are not expected to be strong enough to support bottom-line growth similar to the past year. Only continued expense control and stable balance sheets can make bank stocks desirable in the upcoming quarters.
Below we present two banking stocks which possess the potential to grow appreciably and are slated to report soon, each of which also has a good Zacks Rank and is poised to exceed estimates.
BNC Bancorp
BNC Bancorp (Nasdaq:BNCN-Free Report) is the holding company for the Bank of
The company holds a Zacks Rank #1 (Strong Buy) and has expected earnings growth of 30.40% for the next financial year. The forward price-to-earnings Ratios (P/E) for the current financial year (F1) is 15.22. This stock has a positive earnings ESP of 8.33%
The First of Long Island Corporation
The First of Long Island Corporation (Nasdaq:FLIC-Free Report) is also a holding company for a bank. Its wholly owned subsidiary is
Currently the company holds a Zacks Rank #2 (Buy), and has expected earnings growth of 11.40% for the next financial year. It has a P/E (F1) of 15.43. The stock has a positive earnings ESP of 3.45%.
The banking environment remains fraught with challenges and yet some stocks have the ability to outperform the sector. These two choices have the ability to post good earnings numbers and would make excellent additions to your portfolios.
Today,
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