JPMorgan Chase & Co. usually kicks off bank earnings season, with the company’s performance and Jamie Dimon’s commentary a widely watched signal for how peers are likely to trade. This quarter, Citigroup Inc. is taking the spotlight with its fourth-quarter results due on Monday morning, followed by JPMorgan and Wells Fargo & Co. on Tuesday.
Bank stocks have rallied so far this year after a terrible 2018, with the KBW Bank Index adding more than 5 percent — outpacing the S&P 500’s 3.4 percent gain. That bounce comes after the bank gauge fell almost 20 percent last year. Sensing whether there’s more relief in store will be top of mind for investors.
Analysts became increasingly pessimistic as earnings approached, issuing a slew of cuts to ratings and price targets earlier this month. As of Friday midday, they’d trimmed estimates for earnings per share this fourth quarter by the most for any year-end quarter since 2016, according to data compiled by Bloomberg, with Goldman Sachs Group Inc. the hardest hit among the six biggest banks.
With eyes turning to Citigroup, the bank’s cost-ratio outlook for 2019 will be key, according to Bloomberg Intelligence senior banks analyst Alison Williams. “Critical variables across the board for banks include geopolitics, loan growth, capital markets revenue and expense outlooks,” Williams said.
In early December, a warning from Chief Financial Officer John Gerspach that Citi might post declines in fixed-income trading revenue for the last three months of the year, and Gerspach’s cautioning that volatility may hinder 2018 targets, sent shares tumbling.
With that in mind, Citi’s “forward look and a refresh of the bank’s financial targets” will now capture attention, Credit Suisse analyst Susan Roth Katzke wrote in a note. “Rather than set another near-term efficiency target, we expect and prefer an articulated commitment to flattish expenses” through 2020.