Financials Trade Higher on a Mixed Bag of Bank Earnings

Joe Goldman  |

Bank of America (BAC) , PNC Financial Services ($PNC), and U.S. Bancorp ($USB) all reported quarterly earnings Wednesday morning, each delivering profits that were at least in-line with analyst expectations.           

After a slew of big banks reported bullish earnings reports last week and earlier this week, financial stocks continued to rally on Wednesday on these three earnings releases.

Bank of America reported net income of $3.6 billion, or $0.32 per share, versus $2.1 billion, or $0.19 per share, from the same period a year ago. Revenue for the quarter was $22.73 billion, up from $21.97 billion for the previous quarter. Analysts were expecting a profit of $0.25 per share, according to Thomson Reuters.

Although Bank of America’s is still playing catch-up with most its peers when it comes to revenue growth, an improving economy and successful cost-cutting efforts helped boost earnings 70 percent higher from the previous year.

Bank of America’s trading revenue rose $4.15 billion, up from $3.73 billion a year earlier. The company reduced its mortgage losses and litigation expenses, which helped drive profitability as well.

“The good news in all this is we’re seeing our business reflecting an improving economy,” said CEO Brian Moynihan. His company, however, won’t be able to indefinitely rely on economic growth to prop up earnings, so the company must continue to financially execute its cost-cutting strategies and deliver strong trading profits.

Investors were clearly more impressed with the earnings beat than they were disappointed with the lackluster revenue growth. The stock rose 3.1 percent to $14.35, its highest level since early 2011.

PNC reported net income of $1.1 billion, or $1.99 per share, versus the $546 million, or $0.98 per share, from the same period a year ago. Revenue for the quarter was $4.06 billion, as compared to $3.62 billion from the previous year. Analysts were expecting a profit of $1.63 per share.

PNC’s loans expanded by seven percent year-over-year, partially driven by three percent commercial lending growth for the quarter. PNC also expanded fee revenue by aggressively adding clients to its asset-management business and expanding current services to customers. Corporate services income was also strong, expanding by 22 percent from the same quarter a year ago.

“PNC’s second-quarter results reflect the progress we’re making in the execution of our strategic priorities,” said CEO William S. Demchak, who was especially positive about the company’s expense management, non-interest income, and improving condition in financial markets.

Although the quarter looked outstanding on the surface, Wall Street investors reacted somewhat unfulfilled. Shares pared earlier losses but still traded down 0.3 percent to $74.22. Shares are up 27 percent year-to-date.

U.S. Bancorp, the nation’s largest regional lender, reported net income of $1.48 billion, or $0.76 per share, versus the $1.42 billion, or $0.71 per share, from the same period a year ago. Revenue for the quarter was $4.95 billion, down 2.4 percent from the previous year. U.S. Bancorp profit fell in-line with analysts’ expectations, although revenue fell short of the $5 billion estimate.

“We achieved profitability metrics that remain among the very best in our industry, particularly given the slow, albeit steady, growth we have seen in the markets we serve,” said CEO Richard Davis in a statement on Wednesday.

U.S. Bancorp’s mortgage revenue contracted by 1.2 percent during the quarter and fell by 19 percent year-over-year. However, average total loans increased by 5.2 percent and deposits rose 7 percent for the year. The company made up a shortcoming in revenue with fewer credit-loss provisions.

Shares fell 1.5 percent to $36.71 during trading on Wednesday, but are still up 15 percent year-to-date 

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