Bank Stock Roundup: Q2 Earnings Take Center Stage; BofA, JPMorgan, Citi Outperform

Last week’s five trading days were earnings-heavy for banking stocks. Effective cost-control measures including reorganization and absence of high legal expenses reaped benefits for banks outpacing the Zacks Consensus Estimates. These ultimately led to positive share price movement.

Further, with the economy gaining strength, consumer and commercial loan demand was on an upswing. However, the overall interest rate backdrop remains quite challenging for banks, adversely impacting their net interest margins. This has also impacted net interest income.

Overall performance of banks, however, remained impressive so far, which raised optimism among investors.

(Read the last Bank Stock Roundup for Jul 10, 2015)

Recap of the Week’s Most Important Earnings:

1. JPMorgan Chase & Co. (JPM - Analyst Report) once again proved its caliber of turning the odds in its favor by widely beating on earnings. While industry-wide weakness in the key operating segments was palpable in the second quarter, the bank came up with earnings of $1.54 per share, crushing the Zacks Consensus Estimate of $1.44. The bottom line also improved 5.5% over the year-ago earnings of $1.46 per share. Most impressively, legal expense was as low as $291 million, which lent significant support to earnings.

This aside, JPMorgan’s operating expenses were down year over year, depicting that its cost-saving initiatives are paying off. Total noninterest expenses showed a sequential improvement too. However, provision for credit losses and revenues did not work in favor (Read more: JPMorgan’s Expense Magic Casts Q2 Earnings Beat).

2. Lower non-interest expenses and a rise in revenues drove Bank of America Corporation’s (BAC - Analyst Report) second-quarter 2015 earnings of 45 cents per share, which outpaced the Zacks Consensus Estimate of 36 cents. Further, the figure was up significantly from 19 cents earned in the prior-year quarter. Notably, BofA stated that the results included 4 cents per share of income related to favorable market-related net interest income adjustment.