The big banks lagged the market for much of 2011. The SPDR S&P Bank ETF (ARCA:KBE) is down 19.8% over the past year. This trend is due in part to a tempered outlook by analysts for fourth quarter earnings which will be announced in the coming days. Here is what investors can expect when the heavy hitters in the industry report.
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Big Bank Hit Parade
On Jan. 13, 2012, JPMorgan Chase & Co. (NYSE:JPM) will announce its fourth quarter results before the opening bell. The consensus among analysts is that the company with earnings per share (EPS) of 93 cents, down from $1.12 in the prior year quarter. Total revenue is expected to fall by 12.3% on a year-over-year basis.
JPMorgan is coming off of a tough third quarter, in which its underwriting and advisory fees were down substantially from a year ago. The company has been experiencing improvements in its retail financial services unit which have been fueled by higher mortgage fees and debit card income. Shares of JPM are down 16.6% from a year ago.
Citigroup (NYSE:C) is slated to unveil its fourth quarter earnings on Jan. 17, 2012 prior to the market open. Analysts are calling for EPS of 76 cents versus 40 cents in the year-ago quarter. Total revenue is expected to tick up slightly. Citigroup's shares have lost 39.6% of their value over the course of the last 52 weeks. (To know more about EPS, read How To Evaluate The Quality Of EPS.)
Tough Road Ahead
Prior to the market open on Jan. 18, 2012, The Goldman Sachs Group (NYSE:GS) will weigh in with the results of its fourth quarter performance. The consensus estimate is that the bank will announce a 46.7% drop in EPS on an 18.7% collapse in total revenue in comparison to its fourth quarter in 2010.
Last week, analysts at Sanford C. Bernstein and Tinconderoga Securities made downward revisions for Goldman's fourth quarter. These revisions are partly rooted in the concern that a decline in trading volume will hurt the company's results. Shares of Goldman Sachs have shed 44.5% of their value in the last year.
One other big bank for investors to keep an eye on next week is Wells Fargo & Co. (NYSE:WFC) on Jan. 17, 2012. Wall Street is projecting that the bank will produce an 18% year-over-year increase in EPS despite a 6.6% slide in total revenue. Wells Fargo shares have declined 6.6% since this time last year.
The Bottom Line
Clearly analysts are not expecting earth-scorching results out of the big banks when they report their earnings in the coming days. Cynical onlookers may be in for a bit of a surprise though. These stocks took beatings in 2011 and expectations are anything but optimistic. It may only take a slight earnings beat to get the share prices of these bank stocks back on track. (For additional reading, check out 5 Must-Have Metrics For Value Investors.)
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At the time of writing, Billy Fisher did not own shares in any of the companies mentioned in this article.