Q4 Earnings Preview: US Bank Reports and reason to be positive!
The first serious day of the US earning season started yesterday with better than expected Delta Airline, and today, eyes will be on the banking sector. Wells Fargo & Company (NYSE: WFC), Citigroup Inc. (NYSE: C), and JPMorgan Chase & Co. (NYSE: JPM) will also report their earnings today, before the opening bell. These mentioned banks with Bank of America (BOA), which will report next week, together, controlling more than 50% of all US banking sector. While these days we have many different comments, and outlooks from the US monetary policies in 2022, banking sector reports will be more focused. Not just their earnings reports, also their expectations for the coming quarter and year.
In an overall outlook, we are so positive about the financial sector and have many reasons for that.
2021 was an amazing year in th3 stock markets with a 27% gain of SP500. Increasing interest rates, incomes, and wages are the main reasons that can improve the demand for credit that will fuel further profit growth. The KBW Bank Index "is designed to track the performance of the leading banks and thrifts that are publicly traded in the U.S. The Index includes 24 banking stocks representing the large U.S. national money centers, regional banks, and thrift institutions." (Wikipedia) "The KBW Bank Index of large lenders has surged more than 12% to begin 2022, including a record first five trading days" (Bloomberg)
As I mentioned repeatedly in other articles and analyses, and you know it better, the US is experiencing its highest inflation in the last four decades, therefore it is so likely to see the Fed’s growing hawkish stance and banks shares will benefit from that. Higher rates for banks means more charge for loans, including credit cards.
2021, the economy has been boosting with huge stimulus packages that the government has been providing. In 2022, we do not have that, but on the other hand, we have a huge amount of liquidity accumulated during the pandemic, and now it is time to spend. Therefore, in 2022, the economy will grow mostly with consumer spending, and again more turnover and more profit for financial service providers. For example, spending on Citigroup's credit cards jumped 20% from a year ago.
Market expectations:
Earnings announcement for Citigroup Inc. (NYSE: C): Jan 14, 2022
According to Zacks Investment Research, based on 7 analysts' forecasts, the consensus EPS forecast for the quarter is $1.9300000000000002. The reported EPS for the same quarter last year was $2.07.
Wells Fargo & Company (NYSE: WFC): Jan 14, 2022
According to Zacks Investment Research, based on 9 analysts' forecasts, the consensus EPS forecast for the quarter is $1.09. The reported EPS for the same quarter last year was $0.64.
JPMorgan Chase & Co. (NYSE: JPM): Jan 14, 2022
According to Zacks Investment Research, based on 11 analysts' forecasts, the consensus EPS forecast for the quarter is $3.01. The reported EPS for the same quarter last year was $3.79.
From the technical point of view:
As we can see in the bellow chart, JPM could end the October, November, and first half of December downtrend and regain more than 80% of the loss of 2021 Q4. 20 DMA, ($163) which the 50% of its Fibonacci level also from its latest fall and recovery, is the key pivot point. Technically, we can see this staying above this level can strongly hold the bulls in the chart. A positive report will help the price to continue the gains towards the Q4 2021 peak at $172.95. On the flip side, breaching under $163 will put the $160 and $157, respectively 38.2 & 23.6% of its Fibonacci levels, on the radars.
For the City group, Pivot point sits at $67, technically the chart is positive and all technical indicators remain bullish. $71 and then $81 are the next targets. However, any bearish movement can put the $64.30 (20 DMA) and then $61.30 (23.6% of Fibonacci Level) in the spotlight.
And Finally, Wells Fargo, which has the most bullish chart between the leading banks' charts. Since October 2020, it is improving none stop, with just a bit of pause between 45 and 52 US dollars. And now, the $52 is the key support, with the next target at psychological $60. On the negative reaction and downtrend also, breaching under $52, will put the $49 and then $46 on the radars.
