JPMorgan (JPM), Wells Fargo (WFC) and Citigroup (C) report second-quarter earnings before market open Friday, July 13. Here’s a look at what might be expected from their quarterly reports.
JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC) report second-quarter earnings before market open on Friday, July 13.
The financial sector has been lagging the S&P 500’s (SPX) 2.9% return so far in 2018. JPM has fared better out of the three and is down 1.45% year to date, while WFC is down 8.22% and C is down 8.67%.
All three of the banks passed the Federal Reserve’s stress tests in June and had their capital return plans approved.
Shortly after the stress tests concluded and they got the green light from the Fed, WFC announced it would raise its quarterly dividend by four cents to $0.43 a share and increase its share buybacks to $24.5 billion over the next year; JPM announced it would increase its quarterly dividend from $0.56 per share to $0.80 per share and raised its buyback authorization to $20.7 billion; and C raised its dividend 13 cents, to $0.45 per share, and said it plans to repurchase $17.6 billion of shares over the next year.
The big story weighing on the big banks has been the flattening yield curve, so it’s likely CEOs will discuss the current interest rate environment and how it could impact their businesses, a topic that’s come up regularly on earnings calls in recent quarters.
There was about a week in May where the U.S. 10-year Treasury yield climbed above 3%, but other than that it has pretty much traded between 2.75% and 3% since February, which is around where it was trading at the end of 2013. The spread between the 10-year Treasury and the 2-year Treasury has continued to narrow, recently hitting 29 basis points, the lowest it has been since 2007. If rates do start to move meaningfully higher, that could dampen loan growth as both consumers and businesses might be less willing to borrow at higher rates.
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