The Big 6 Banks are Hiding Something Scary
Reduced lending and fees and have resulted in lower revenues for banks (NYSE:XLF) during the last three years. The KBW Bank Index BKX (NYSE:KBE) which is comprised of the 24 biggest US banks has dropped ~58% percent since the heights achieved pre-economic crisis. That’s a horrid return for shareholders.
Worse, the most affected banks happen to be the six giants investors love(NYSE:D) most: Bank of America Corporation (NYSE:BAC), JPMorgan Chase & Co (NYSE:JPM), Morgan Stanley (NYSE:MS), Citigroup Inc (NYSE:C), Wells Fargo & Company (NYSE:WFC) and Goldman Sachs Group Inc (NYSE:GS). And now they’re hiding something from the sweeter headlines of earnings season.
According to Bloomberg, “Net revenue at the six lenders fell 13.3 percent in the first quarter from a year earlier. Pretax pre-provision profits, which exclude taxes, loan-loss provisions and one-time items and are considered a better gauge of profitability than earnings, slid 40.2 percent.”
Now, “While five of the banks beat analysts’ estimates, and JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC) reported record quarterly earnings, anemic revenue and a steady drop in pre-provision profits have kept investors at bay.”
Here’s how the Big 6 performed during yesterday’s trading session:
Bank of America Corporation (NYSE:BAC) declined 1.69 percent to $12.23 with volume of 145.75 million shares.
Morgan Stanley (NYSE:MS) gained 0.27 percent to $25.85. Morgan Stanley reported a decline of 45 percent in its net income to $968 million for the first quarter while its revenue plunged 16 percent to $7.6 billion for the first quarter as compared to $9.1 billion last year.
Citigroup Inc (NYSE:C) also declined by 0.22 percent to $4.51 on volume of 369.61 million shares. The New York based bank reported a 22.4 percent decline in its net revenue to $19.7 billion for the first quarter.
Wells Fargo & Company (NYSE:WFC) also reported the decline of 5.2 percent in its net revenue however, net profit increased by 48 percent to $3.8 billion for the first quarter. Shares were up 1.09%.
Goldman Sachs Group Inc (NYSE:GS) also disappointed investors during earnings as its net profit decreased by 21 percent to $2.7 billion for the first quarter. GS rose 0.7%.
Yesterday’s big winner was JPMorgan Chase & Co (NYSE:JPM). Shares surged 1.14 percent to $45.12 with volume of 25.74 million shares.
Now let’s see if shareholders care about what lies beneath the glossy spectacle of investor relations and earnings season.