Trump Administration Policies Drive Banking Stocks
Financial and banking stocks (XLF) rallied following the election of President Donald Trump due to expectations of banking reforms, including the repeal of the Dodd-Frank Act, lower corporate taxes, and fewer banking regulations.
Rising equities and trading activities have benefited commercial banks and brokers in the form of higher revenues and profits. In 1Q17, JPMorgan Chase (JPM) beat analysts’ consensus EPS (earnings per share) estimate of $1.52, posting EPS of $1.65 on higher trading and investment banking activity and higher net interest margins.
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Banks’ 2017 performances
Bank of America (BAC) posted total revenue of $22.2 billion in 1Q17, compared to $20.8 billion in 1Q16, mainly due to higher interest and non-interest income. The bank posted net interest income of $11.1 billion, compared to $10.5 billion in 1Q16. Its non-interest income rose 9% to $11.2 billion during the same period.
One of the relatively weak performers, Citigroup (C), also beat estimates of $1.24 and posted EPS of $1.35. The bank’s 1Q17 revenue rose to $18.1 billion, beating estimates of $17.8 billion. Its earnings beat was mainly due to a 16% rise in institutional group revenue, which was partially offset by a 40% fall in the corporate division due to the winding up of legacy assets.
Wells Fargo (WFC) also beat analysts’ consensus EPS estimate of $0.97, posting EPS of $1 in 1Q17. The bank has faced slower credit growth recently mainly due to investigations, regulations, and recent sanctions surrounding fake account opening scams.