Top bank analyst provides 4Q bank earnings preview
Odeon Capital Group chief financial strategist Dick Bove on his outlook for the financial sector ahead of big bank earnings.
Earnings season for the big banks will kick into high gear on Friday with JPMorgan, Citigroup, and Wells Fargo all reporting quarterly results.
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| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| C | CITIGROUP INC. | 66.86 | +0.19 | +0.28% |
| JPM | JP MORGAN CHASE & CO. | 140.35 | +0.13 | +0.09% |
| WFC | WELLS FARGO & COMPANY | 33.80 | -0.14 | -0.41% |
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Odeon Capital Group Chief Financial Strategist Dick Bove says the biggest banks are going to show “much better earnings than expected” and possibly positive forecasts despite weaker loan volume.
“Interest rates went up so their margins are higher. They’ve over reserved for bad loans so they’re going to reduce their reserves, they’re seeing low operating costs because of the huge amounts of money they’ve spent on technology” he said during an appearance on “Morning with Maria."
He also noted select banks will see an extra boost from activity such as mergers and acquisitions and initial public offerings.
“If they're the big banks, guys like JPMorgan, Bank of America, Goldman, Morgan Stanley, there has been an explosion of activity in the capital markets arena” he added.
Bove also predicts that 2021 is likely going to be “one of the strongest” bank earning periods ever seen.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| XLF | FINANCIAL SELECT SECTOR SPDR ETF | 31.32 | -0.02 | -0.06% |
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U.S. banks have recently benefited from rising Treasury yields, which pushed the 10-year note above 1% last week for the first time since last March when the coronavirus pandemic pushed the country’s economy to a virtual standstill as state and local leaders imposed strict lockdown orders in an effort to curb the spread of COVID-19.
During the pandemic, America’s biggest banks have borne the brunt of the stock market turbulence surrounding the Federal Reserve’s emergency interest rate cuts. A rate cut is detrimental to a bank’s earnings as it slices the profit margin on loans.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| BAC | BANK OF AMERICA CORP. | 33.46 | -0.20 | -0.59% |
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FED'S POWELL SAYS US ECONOMY MAY NEED MORE POLICY HELP TO AVOID 'PROLONGED' RECESSION
Bove then pointed to his 2021 forecast, noting that if “you assume that the economy is going to get better, there’s this huge unbelievable amount of liquidity sitting in the banks at the present time, which will move from a liquid position to loans.”
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“The Federal Reserve, in my view, is going crazy printing money,” Bove said. “And 83% of the money which they create is bank deposits so you’ve got $17 trillion sitting in the banking industry and as anybody who has a bank account knows you’re not getting paid anything for putting your deposits in a bank.
“So the net effect is the banks have that money and they are ready to spend it in loans if the economy picks up,” he continued.
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Fox Business’ Jonathan Garber, James Langford, Brittany De Lea, Megan Henney and Chris Ciaccia contributed to this report.
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