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Wall Street’s Expectations for US Bankers in Q3 2018

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Dec. 4 2020, Updated 10:53 a.m. ET

Q3 expectations

Broader markets have risen in the past few months on corporate earnings and slower rate hike expectations due to the Trump administration’s criticism of the Fed’s hawkish policy. A pickup in wealth management, advisory services, trading, and rate spreads is expected to drive banks’ (XLF) performance in the second half of this year.

Energy stocks have benefited from oil prices (USO) rising, retail and consumer finance stocks have risen on lower unemployment and higher wage growth, and captive sectors such as steel and manufacturing are rising on increasing import duties.

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Wells Fargo (WFC) is expected to post EPS of $1.18 and $1.21 in the third and fourth quarters, respectively, while its revenue is expected to fall 1.2% and 1.50% YoY (year-over-year). Repurchases, expense management, and lower tax could boost its EPS. However, its non-interest income is expected to remain weak on mortgage banking.

Peer comparison

In the third and fourth quarters, Bank of America’s (BAC) EPS are expected to grow 33% and 38% YoY to $0.64 and $0.66, respectively. The bank’s revenue is expected to rise 4.10% in the third quarter, reflecting major lending, trading, and advisory service growth.

In contrast, Citigroup’s (C) EPS are expected to rise 16.9% YoY to $1.66, and its revenue is forecast to rise 1.5%. It’s expected to see lower growth than the other top two players.

JPMorgan Chase (JPM), the largest US banker, is expected to see its EPS grow 30.1% YoY to $2.29 in the third quarter. The bank’s top line is expected to grow 6.1%, helped by lending, trading, rate spreads, and investment banking fees.

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