The fourth-quarter 2010 earnings season took off to the races on Friday as JPMorgan Chase reported a 47% boost in earnings over Q4 2009, thus confirming analysts’ expectations for a positive shift in the finance sector’s fortunes after a rough couple of years.

“More than two years after the financial crisis, we believe the U.S. financial services sector is poised to shift toward capital deployment from capital accumulation in 2011,” wrote Keefe Bruyette & Wood’s North America Equity Research team of analysts in a 2011 finance-sector outlook published in December.

Signs of that shift have already started to appear, with JPMorgan executives talking about an increased dividend—one of the forms of capital redeployment anticipated by KBW. For year-end 2010 and 2011, the analyst team also foresees more share repurchases as well as mergers and acquisitions.

Expect a Choppy Stock Market Performance

Lending and growth opportunities for financials may be constrained, though, by the slow pace of the U.S. economic recovery. And stock performance may not reflect the brighter fundamentals.

John Scherr, founder and president of earnings watchdog site, said Friday after the JPMorgan results were posted that he expects a mixed performance from banks for the Q4 earnings season. Even JPMorgan’s strong results may see short-term negative price movement, Scherr said.

“The stock tended to see negative price movement in each of the last five earnings reports,” he said. “JPM has topped the whisper number by an average of 14 cents in the past four quarters.  To us that simply means the company is doing a poor job of managing earnings expectations.  JPM have now set themselves up to have to beat the expectations by at least 14 cents before the earnings can be considered a true positive surprise.”

JPMorgan’s earnings per share came in at $1.12 versus analysts’ expectations for EPS of $0.99. The bank’s stock after the earnings release on Friday was up $1.18 per share in early trading, or 2.63% higher at $45.63 versus Thursday’s close of $44.45. On Friday, JPM stock closed $0.46 higher, or 1.03%, at $44.91. The New York Stock Exchange is closed Monday as the nation observes Martin Luther King Jr. Day.

M&T Bank Reports 53% Rise in Profits

Also on Friday, M&T Bank Corp. (MTB), based in Buffalo, N.Y., reported that Q4 net income rose 53%, as income from interest, fees and other charges rose and the bank set aside less for loan losses. The bank reported net income available to common shareholders of $189.7 million, or $1.59 per share, compared with $122.9 million, or $1.04 per share, in 2009. Analysts expected income of $1.44 per share, and MTB shares of the company fell $0.06 to $86.20 in Friday morning trading but closed $0.12 higher at $86.38.

In another reflection of KBW’s prediction for a more active banking sector, M&T Bank and Wilmington Trust Corp. announced Nov. 1, 2010, that they made a merger agreement under which Wilmington Trust will merge with M&T.

This Week’s Q4 2010 Earnings Calendar for the Finance Sector

This week, Q4 2010 season will be in full swing, when more than 30 financial firms report Q4 earnings. Here is a calendar marking earnings dates scheduled this week for firms of greatest interest to financial advisors:

  • Tuesday, Jan. 18: Citigroup Inc. (C), before market open; Charles Schwab (SCHW), before market open; TD Ameritrade (AMTD), before market open.
  • Wednesday, Jan. 19: Bank of New York Mellon (BK, including subsidiary Pershing Advisor Solutions) ; Goldman Sachs (GS), before market open; Raymond James (RJF), after market close; State Street Corp. (STT), before market open; UBS AG-USA (UBS), before market open; Wells Fargo (WFC); before market open.
  • Thursday, Jan. 20: Morgan Stanley (MS), before market open; PNC Bank (PNC), before market open.
  • Friday, Jan. 21: Bank of America Merrill Lynch (BAC), before market open.

Read a full version of AdvisorOne's 2010 Q4 earnings calendar for the financial sector.