Traders' Insight: A Disappointing Start to Earnings Season Sends Markets into Tailspin
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Banks Kick Off Q4 Reporting Season on the Wrong Foot
In 2021 all of us that watch quarterly earnings became accustomed to big beats from a majority of S&P 500 companies, especially the banks as they start each earnings season and had easier comparisons to 2020. That has changed this earnings season. Q4 kicked off with a whimper. In a stunning reversal from the last few years, Wells Fargo was the only big bank that beat on both the top and bottom-line and saw a pop in share prices, as the consumer bank benefitted from a pick up in consumer spending, higher fees, and increased lending in the second half of the year.
JPMorgan and Citigroup had a different fate however. JPMorgan beat on EPS (actual: $3.33 vs. estimate: $3.01*) but missed on the top-line (actual $29.25B vs. est: $29.78B*). Headwinds included higher expenses and a tightening labor market. Citigroup on the other hand surpassed revenue expectations (actual: $17.01B vs. est: $16.85B*) but missed bottom-line estimates (actual: $1.46 vs. est: $1.72*), also due to increased expenses and a decrease in revenues for their global consumer banking business. *All estimates provided by FactSet
We are still waiting on results from the remaining three big banks this week: Bank of America and Goldman Sachs on Tuesday, and Morgan Stanley on Wednesday.