Bank analysts are bullish on the prospects for Goldman Sachs Group Inc. and Morgan Stanley earnings on Wednesday and Thursday after JPMorgan Chase & Co. and Citigroup Inc. reported better-than-expected trading, particularly in fixed income.
“We view these results as a positive read-through,” UBS analyst Eric Wasserstrom wrote in a note. Implications for equities were less clear, but both Goldman and Morgan Stanley should “react well to these prints,” he said.
Bloomberg Intelligence’s Alison Williams concurred, adding that expectations were higher for Bank of America Corp. as well. “FICC growth was helped by easier comparisons with a weak fourth quarter 2018 and exceeded equities trends,” she wrote. That was “anticipated and similar to Jefferies’ results,” she said, and added that advisory fees also topped estimates.
JPMorgan and Citigroup shares rallied on Tuesday after their earnings beats, and as their CEOs hailed a strong U.S. consumer. Goldman rose as much as 1.4% to the highest since April 2018, Morgan Stanley climbed 0.9% to the highest since May 2018, and BofA, which is due to report on Wednesday, was up about 0.2%.
Citigroup shares gained as much as 3.1%, the most since late October. CEO Michael Corbat echoed JPMorgan CEO Jamie Dimon’s earlier comments about a strong U.S. consumer, saying that “the U.S. consumer franchise saw continued strong growth in Branded Cards and sustained its momentum in attracting digital deposits.”
Dimon said that American consumers continue “to be in a strong position,” and flagged a “robust holiday season,” which boosted card sales volumes 10%. Dimon added that “global growth stabilized, albeit at a lower level, and resolution of some trade issues helped support client and market activity towards the end of the year.”
JPMorgan shares climbed 2.6%, the most since mid-December.
Wells Fargo, on the other hand, tumbled 4.8%, the most since December of 2018, after the bank’s adjusted earnings per share missed estimates and its results included $1.5 billion of “litigation accruals for a variety of matters, including previously disclosed retail sales practices matters.” The bank also forecast net interest income would drop low-to-mid single digits in 2020.
“Wells Fargo is a wonderful and important franchise that has made some serious mistakes, and my mandate is to make the fundamental changes necessary to regain the full trust and respect of all stakeholders,” new CEO Charlie Scharf said.