Bank of America (BAC) and Citigroup (C) reported stronger-than-expected earnings early Thursday, as banking stocks continue to reap the benefits of a recovering economy, growing investment activity and narrowing credit loss exposure. BAC stock and Citigroup rose early.
Bank of America Earnings
Estimates: Analysts polled by Zacks Investment Research expected Bank of America earnings per share of 65 cents, a 63% gain from the year-ago quarter, on revenue of $21.91 billion.
Results: Bank of America earnings jumped 115% to 86 cents a share with revenue at $22.9 billion. A reserve release of $2.7 billion helped boost BofA earnings.
Consumer banking revenue fell 12% to $8.1 billion. Wealth management revenue rose 1% to $5 billion. Global banking rose 1% to $4.9 billion, as investment banking and underwriting fees hit a record. Fixed-income trading revenue swelled 22% to $3.3 billion, and equities trading grew 10% to $1.8 billion.
Bank of America also approved a $25 billion share buyback program.
Bank of America’s relative strength line is trending upward, as banking stocks enjoy a rotation into value stocks. Its RS Rating is 76, slightly below the 80 that IBD recommends when evaluating stocks. Meanwhile, its EPS Rating is just 59, as the company’s profits have suffered during the pandemic.
Estimates: Citigroup earnings per share is seen soaring 142% to $2.56, while revenue was expected to fall 9% to $18.91 billion.
Results: EPS of $3.62 on revenue of $19.3 billion. Citi released $3.9 billion in loan loss reserves and is exiting 13 overseas markets. They include consumer franchises in Australia, Bahrain, China, India, Indonesia, Korea, Malaysia, the Philippines, Poland, Russia, Taiwan, Thailand and Vietnam.
“While the other 13 markets have excellent businesses, we don’t have the scale we need to compete,” said CEO Jane Fraser.
Global consumer banking revenue fell 14% to $7 billion. Investment banking jumped 46% to $2 billion. Fixed income trading fell 5% to $4.55 billion, while equities trading climbed 26% to $1.48 billion.
Stock: Shares rose 3% to 75.14 early Thursday. Citigroup stock closed in buy range from a cup base with a buy point of 69.52. It has a follow-on entry point at 76.23 from a four-weeks-tight pattern. At the end of this week, that tight pattern will be a flat base with a buy point of 76.23.
Citigroup’s relative strength line has leveled off after declining over the last month. Its RS Rating is 71, while its EPS Rating is 54.
JPMorgan and Goldman got a lift from strong trading and investment banking revenue amid stock market volatility and a surge in new listings.
Morgan Stanley (MS) reports earnings Friday.
Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
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