Bank Stocks Earnings: Last Weeks Affects, This Weeks Announcements

After hearing from many of the more popular bank stocks, we would like to review some of the more significant bank stocks and their stories. The main trends that seem to define the future of the bank stocks was declining trading revenue, Banks stocks are exposed to heavier regulation causing higher expenses. On the bright side Bank stocks as a group have reported lower loan losses and higher loan originations.

On Tuesday, Citigroup Inc. and Wells Fargo & Co. Two of the larger bank stocks recorded their strongest loan-growth numbers since the financial crisis. The figures confirm a warming trend highlighted last week by J.P. Morgan. this trend seems to be solidifying among other bank stocks as well.

The lending gains mark a defined change from the past few years, when lackluster figures opened bank stocks to criticism from politicians and others that their tight grip on cash was staling economic growth. The recent data reported from bank stocks, signals that the deleveraging that swept the economy following the 2007-08 turmoil may be easing. This information is not a recommendation we are only trying to collect and group together some of the more popular bank stocks presenting a general view of the group’s earnings, which may give you additional insight and understanding into bank stocks.

Citigroup (C) – One of the larger bank stocks, fourth-quarter net income dropped 11 percent compared to the same period in 2011, to $0.38. Due to a decline in revenues, there was a $465 million hike in operating expenses, and a $470 million jump in tax provisions. Analysts were looking for EPS of $0.48 the consensus range was $0.30 – $0.64 a share. Revenue came in at $17.17B compared to expectations of $18.54B.

Full Year 2011 net Income of $11.3B was up 6% and Full Year 2011 revenues of $78.4B compared to $86.6B in 2010. Book value per share was up 8% to $60.78, tangible book value per share was up 12% to $49.81.

One bright spot was a drop in loan losses, which fell 40 percent to $4.1 billion, suggesting that for consumers at least, the economy was becoming more solid.

Wells Fargo (WFC) – One of the larger bank stocks, announced earnings of $0.73 and revenue of $20.06B.  Analysts were looking for EPS of $0.72 on revenue of $20.08B. This compares to last year’s gain of $0.61. For the full year revenues are expected to decline to $80.61B. The company reported revenues of $80.9 and earnings per share increased to $2.83 from $2.21 in the previous year.

Goldman Sachs (GS) – One of the larger bank stocks, although earnings dropped 58 percent to $1.01 billion, or $1.84 a share, they beat the $1.28 average estimate by 56 cents. Revenues fell 30% year over year to $6.05 billion versus the $6.32 billion consensus. Revenue for 2011 dropped 26 percent to $28.8 billion, the lowest since 2008. Revenues were expected to decline to $30.15B. Book value per common share was $130.31 and tangible book value per common share was $119.72.

Bank of America (BAC) - One of the larger bank stocks, analysts were looking for EPS of $0.23 and the consensus range was $0.03-$0.48. Earnings came in at $0.15 this compares to last year’s gain of $0.04. Revenue was $25.1 billion, up 11% from $22.7 billion in the prior-year quarter. Revenues also surpassed Estimates of $24.11B.

Bank of America is one of the largest credit card issuers and they made the point that Americans seemed to be getting their financial houses in order by paying off more debt in a timely manner. Their customers who paid bills a month late declined for the 11th consecutive quarter.
Morgan Stanley (MS) One of the larger bank stocks, posted a smaller-than-expected​d loss of $250 million, or 15 cents a share, on strong trading revenue. Revenue plunged 26% to $5.71 billion. After lowering estimates deeply, analysts were looking for a loss of $0.57 on revenue of $5.57B.

“The bar is pretty low,” Ralph Cole, a senior vice president in research at Ferguson Wellman Inc., told Bloomberg News in regards to these results. “If they can show less weakness than their peers, that appears to be strength.”

Morgan Stanley, underwriting revenue of $477 million fell 54% from last year’s fourth quarter, while advisory revenue fell 16% to $406 million. Here again Morgan Stanley beat earnings estimates making it the fifth quarter in a row to beat expectations.

Next Week Northeast and Mid-Atlantic Banks Stock Earnings

This information is not a recommendation we are only trying to inform you of the street’s expectations for these companies. All the data provided here is from Yahoo Finance.

New York Community Bancorp, Inc (NYB) – Wednesday, before bell: One of the larger local bank stocks, analysts are looking for EPS of $0.27 on revenue of $295.94M this compares to last year’s gain of $0.31. The consensus range is for $0.25 – $0.31, and $ 282.72M – $307.00M for revenue. For the fiscal year 2011, revenues are expected to rise to $1.2B from $1.18B for the previous year. Earnings per share are expected to decline to $1.10 compared to $1.21 for 2010.

Hudson City Bancorp, Inc. (HCBK) – Wednesday, before bell: One of the larger local bank stocks, analysts are looking for a loss of $0.74 on revenue of $228.62M this compares to last year’s gain of $0.25. The consensus range is for a loss of $0.76 – $0.72, and $215.27M – $245.10M for revenue. For the fiscal year 2011, revenues are expected to decline to $1.01B from $1.19B for the previous year. Earnings per share are expected to decline to a loss of $1.51 compared to a profit of $1.09 for 2010.

Brookline Bancorp, Inc. (BRKL) – Wednesday, after the close: One of the local bank stocks Analysts are looking for EPS of $0.12 on revenue of $26.85M this compares to last year’s gain of $0.11. Being a smaller Bank there are few analysts covering this company. For the fiscal year 2011, revenues are expected to rise to $1.05M from $91.75 reflecting 14.5% growth from the previous year. Earnings per share are expected to rise to $0.50 compared to $0.45 for 2010.

First Niagara Financial Group (FNFG) – Thursday, before bell: One of the local bank stocks, analysts are looking for EPS of $0.24 on revenue of $304.73M this compares to last year’s gain of $0.24. The consensus range is for $0.22 – $0.26, and $295.54M – $312.40M for revenue. For the fiscal year 2011, revenues are expected to rise to $1.12B from $784.40M for the previous year. Earnings per share are expected to rise to $0.98 from $0.87 last year.

Valley National Bancorp Common (VLY) – Thursday, before bell: One of the larger local bank stocks, analysts are looking for EPS of $0.19 on revenue of $138.21M this compares to last year’s gain of $0.23. The consensus range is for $0.18 – $0.21, and $133.88M – $152.51M for revenue. For the fiscal year 2011, revenues are expected to rise to $585.7M from $554.08M for the previous year. Earnings per share are expected to rise to $0.84 from $0.77 last year.

Provident Financial Services (PFS) – Friday, before bell: One of the  local bank stocks, analysts are looking for EPS of $0.27 on revenue of $54.77M this compares to last year’s gain of $0.23. The consensus range is for $0.26 – $0.28, and $54.35M – $55.50M for revenue. For the fiscal year 2011, revenues are expected to rise to $216.85M from $208.96M for the previous year. Earnings per share are expected to rise to $1.03 from $0.90 last year.

To view other bank stocks clicks here

We have chosen to review the earning of bank stocks because many of the bank stocks have been hurt by the financial crisis and now again the bank stocks as a group has been hurt from the European crisis

8 Bank Stocks Announcing Earnings this Week

Earnings season is upon us, Alcoa the first major company to announce its earrings in the past week. JP Morgan the first major bank stock to announce earnings said, quarterly net income was $3.72 billion, or 90 cents a share, compared to $4.83 billion, or $1.12 a share in the same quarter last year. The GAAP Capital IQ Consensus Estimate was for $0.92 and the non-GAAP consensus was $0.90. Revenues fell 9.6% year over year to $21.47 billion and versus consensus expectations of $22.68 billion.
After the Martin Luther King Jr. Holiday, we will be hearing form many of the more popular banks stocks, many of which are widely held. I would like to review some of the large bank stocks as well as some of the local NY area bank stocks, mainly companies held by our clients. Slowing economic growth, mounting mortgage liabilities and heightened worries that Europe’s debt crisis will spread have weighed heavily on bank stocks all year. Bank stocks had the industry’s worst two years of revenue growth since the Great Depression, according to Mike Mayo, an analyst with independent research firm CLSA in New York. Earnings across the industry in bank stocks were weak in the fourth quarter and won’t have much improvement this year, he said. New Regulations The so-called Durbin amendment, which limits what lenders can charge merchants on debit transactions, took effect on Oct. 1, affecting almost all U.S. banks and costing the top 25 bank stocks about $1.5 billion. JPMorgan said that the new rules will reduce its net income by about $600 million a year. Estimates on bank stocks have been slashed by many analysts as future revenues are expected to be soft, one may argue that bad news has been built into the market’s expectations. Recently optimism in the market’s have sent the financial sector sailing, Obviously, yearend bank stocks earnings, will have an effect in determining their future performance . This information is not a recommendation, we are only trying to inform you of the street’s expectations for these companies. All the data provided here is from Yahoo Finance.

Citigroup (C) – Tuesday, before bell: One of the widely held bank stocks Analysts are looking for EPS of $0.48 on revenue of $18.54B. This compares to last year’s gain of $0.40. The consensus range is $0.30 – $0.64 for EPS, and $17.48B – $19.84B for revenue. During the past three months earnings were revised downward from previous expectations of $0.89 per share. For the full year, revenues are expected to decline by 8% to just under $80 billion. Earnings per share are expected to increase to $3.81 compared to $3.50 in the past year.

Wells Fargo (WFC) – Tuesday, before bell: One of the larger bank stocks, analysts are looking for EPS of $0.72 on revenue of $20.08B. This compares to last year’s gain of $0.61. The consensus range is $0.66-$077 for EPS, and $19.35B-$20.82B for revenue. For the fiscal year 2012, revenues are expected to decline to $80.61 B.  versus $85.21B for the previous year. Earnings per share are expected to increase to $2.82 from $2.21 in the previous year.

Goldman Sachs (GS) – Wednesday, before bell: One of the larger bank stocks, analysts are looking for EPS of $1.28 on revenue of $6.65B. This compares to last year’s gain of $3.79. The consensus range is $0.70-$2.50 for EPS, and $5.94B-$8.75B for revenue. During the past three months earnings were revised downward from previous expectations of $3.14 per share. For the fiscal year 2011, revenues are expected to decline to $30.15B. versus $39.16B. for fiscal 2010. Earnings per share are expected to decline to $4.87 compared to $13.18 in the past year.

PNC Financial Services Group, Inc (PNC) – Wednesday, before bell: One of the larger bank stocks, analysts are looking for EPS of $1.41 on revenue of $3.54B. This compares to last year’s gain of $1.50. The consensus range is $1.14-$1.64 for EPS, and $3.47B-$3.61B for revenue. During the past three months earnings were revised minimally from previous expectations of $1.42 per share. For the fiscal year 2011, revenues are expected to be $14.33B. versus $15.18 for fiscal 2010. Earnings per share are expected to increase from $5.74 in the past year to $6.19. PNC has been from the bank stocks that have beat earnings estimates in each of the past four quarters.

Bank of America (BAC) – Thursday, before bell: One of the larger bank stocks, analysts are looking for EPS of $0.23 on revenue of $24.11B. This compares to last year’s gain of $0.04. The consensus range is $0.03-$0.48 for EPS, and $21.94B-$27.24B for revenue. During the past three months earnings were revised slightly upwards. For the fiscal year 2011, revenues are expected to decline to $94.54B.  from $110.22B for fiscal 2010. Earnings per share are expected to decline to $0.11 compared to $0.86 in the past year.

Morgan Stanley (MS) – Thursday, before bell: One of the larger bank stocks, analysts are looking for a loss of $0.57 on revenue of $5.57B. This compares to last year’s gain of $0.43. The consensus range is for a loss of $0.34-$0.81, and $4.37B-$9.48B for revenue. During the past three months earnings were sharply revised and cut to the current amount from a gain of $0.42. Revenues are expected to rise slightly to $32.51B. from $31.62B. for the previous year. Earnings per share are expected to decline to $0.82 compared to $2.44 in the past year. On the bright side, Morgan Stanley has been from the bank stocks that have beat earnings estimates in each of the past four quarters.

People’s United Financial, Inc. (PBCT) – Thursday, after the close: One of the larger northeastern bank stocks, nalysts are looking for EPS of $0.19 on revenue of $315.76 M. this compares to last year’s gain of $0.10. The consensus range is for $0.17 – $0.20, and $ 271.80M-$ 325.70M for revenue. For the fiscal year 2011, revenues are expected to rise to $1.22B. from $998.20M for the previous year. Earnings per share are expected to increase to $0.66 compared to $ 0.35 for 2010.

Capital One Financial Corporation (COF) - Thursday, after the close: One of the larger bank stocks, analysts are looking for EPS of $1.54 on revenue of $4.14. this compares to last year’s gain of $1.52. The consensus range is for $1.26- $1.79, and $3.93B-$4.35B for revenue. For the fiscal year 2011, revenues are expected to be at $16.36B. compared to $16.17B for the previous year. Earnings per share are expected to increase from $6.01 for 2010 to $7.56 for 2011. COF has beat earnings estimates in each of the past four quarters.

To view other bank stocks

We have chosen to review the earning of bank stocks because many of the bank stocks have been hurt by the financial crisis and now again the bank stocks as a group has been hurt from the European crisis

Stock picks: How to screen for Stock Picks?

With all the buzz about the January effect, you may want to ask yourself How do I screen for stock picks? Which stocks should I buy? In truth it’s not so hard to do your own homework and compile a list of companies whose stocks have been badly hurt as a result of tax loss selling or in general due to the weak market this past year. The main point is to make sure they still have sound fundamentals behind them before you add a company to your list of “stock picks”.

We will try and give you some ideas on how a little research can pay off!

You can start with looking for stories about the biggest blowups in the past year, some will make good stock picks. Some publications will even create a list discussing a variety of corporate disasters or other major headlines. Not only will this give you a feel for the market, it can be an excellent source for investment ideas, and even make for some good reading.

Once you have found a group of stocks that you like, review them. Your on now on the way to start your own “stock picks list”. Filter out the stories about companies and stocks that have taken a beating for a specific reason, a one-time event or any other situation that will not have a long term affect on the company add them to your “stock picks list”. It should be a situation that you believe the company can overcome. For example, a company that reported a large one-time non recurring loss, should not have a lasting effect on the company and may be something for you to look into. A company like this should be able to recover financially in due time. It may be a candidate to add to your stock picks list.

You can also look for companies that have been downgraded by many analysts. That can be as easy as googeling “Stocks Seeing Big Analyst Downgrades.”
Here one can argue that a lot of criticism may have hurt the stock price. When a company gets knocked down, many shareholders run for cover and sell aggressively overselling the stock. In some cases this will result in replacing the shareholder base and creating a new set of shareholders who are ready to take a bumpy ride, making the company a potential candidate to be added to your stock picks list.

There are two breaking points to watch and consider. The $10 level and the $5 level. Many institutions will not purchase a stock that is less than $10 since they don’t want to be accused of investing in low quality, low priced companies. This causes a stock that drops under $10 to fall further by institutional shareholders selling their shares. At the $5 level many brokerage houses will deny margin. This will cause excessive selling when they close out the positions that are no longer marginable.

Another point to consider when buying stocks that have sold off sharply is to research if there was any insider buying. As the saying goes there are many possible reasons for an insider to sell a stock but only one reason to buy… They expect the stock to go up and make money!.
When a stock drops, a good indicator to add to the equation before considering a stock for to your stock picks list. is insider buying.

There are many stock screeners available for free on the web they can help you create your list of stock picks. Here are links to Yahoo’s and Google’s stock screener:

Here is a simple screening process I set up that you can use as a starting point;
This is done with the Google stock screener.

Our Criteria
Market cap – You can start with $500 million
52w price change (%) – You can start with 50%
Last price – You can start with $5
EBITDA margin (%)-You can start with 15%
Average volume -You can start with 150,000

Again please don’t forget one main factor, “don’t buy a bad company”. It is most important to make certain that the company you are choosing has sound fundamentals. Have fun and explore different ideas as you start crating your stock picks list.

Stock losses: Year End Market Trends

At times recurring annual and seasonal cycles can be identified in the stock market.

Cycles identify January as a positive month of the year. Why? Because January is 30 days after the tax loss selling occurred and the month when some of the stocks sold in December for a tax loss are bought back and returned to the portfolio. That is why you see a blip or jump in the value of stocks in January. It is a virtual green shoot.

While there is no such thing as a foolproof recurring pattern in the market, there are known cycles that some people believe in. Some of these cycles are seasonal. We have the Christmas Rally the January effect, presidential cycles, 10 year cycles etc.

Many have been saying that 2011 has been “the year of the Stock Trader’s Almanac”, with all the good ole market clichés falling into place. The famous saying “sell in May and go away” proved to be great advice this year. But that was not the only old boy’s adage that panned out. Our recent Santa Claus rally beginning in mid December seems to take hold now, so it’s only reasonable to take a closer look at another famous trend the “January effect.”

January Effect

As we wrote in our previous blog many investors take stock losses at year’s end for tax purposes. It is not uncommon to see investors sell losing stocks at the end of the year to take advantage of short term stock losses. Other investors may create a new portfolio at the beginning of the year and then rebalance quarterly or monthly as the market dictates. An end of the year review and portfolio rebalance is very common, creating additional selling pressure to stocks prior to year’s end.

While not every January shows overall gains in the stock market, the pattern is common. Although it is termed the January effect one should be aware that this pattern doesn’t necessarily last the entire month, nor does it begin on January First. Therefore one needs to be careful on how he is going to capitalize on this phenomenon.

UBS analyst Peter Lee points out that such a so-called “January Effect” has over the years shown the most sway with small-cap stocks. More specifically, studies have shown that from the year 1953 to 1995 inclusive, stocks of low capitalization outperformed stocks of higher capitalization for 40 years out of a total of 43 years.

This year, small capitalization stocks have been under a lot of pressure. The Russell 2000 (a Small cap index) is down 2.89 while the Russell 1000 (a Large cap index) is up 2.12%. Some of the stocks in the Russell 2000 are down more than 50% from their 52-week highs and many are down more than 25% from the 52-week high.

There is a good possibility that all the tax loss selling seen in November-December will set up to January gains.

American Economy: How do US Sales in Europe Weigh on the American Economy & Investor?

The US Stock Markets have been battered by news bites and headlines arising from the hoopla and turmoil caused by the Greek debt crisis followed by the Italian bond yield explosion. Each time a new piece of information rolls out of Europe our markets start spinning, resulting in a historic level of volatility when compared to almost any other period. As a result, I thought it would make sense to take a look at the amount our economy is really exposed to Europe in an effort to give you, the investor, a better understanding of the underlying issue. It is up to you to decide, if you think the current volatility is warranted or over done?

Here are some of the raw numbers: (not including US Bank exposure to European bonds)

In 2010, the economy of the European Union generated a GDP (Gross Domestic Product) of over €12,279.033 trillion (=$16.069 Trillion) according to the International Monetary Fund, making it the largest economy in the world. The European Union economy consists of a single market and the EU is represented as a unified entity in the World Trade Organization. Click here for more details on the U.S. GDP.

According to the Financial Forecast Center the US economy is expected to grow to close to $15.5 trillion by March of 2012 making it the second largest economy.

U.S. GDP Gross Domestic Product
Past Trend Present Value & Future Projection
Billion US Dollars. Annual Rate Seasonally Adjusted.

So the real question is how much business do we do with the Europeans? According to an article in USA Today the European Union is the Number one U.S. trading partner. “Nearly $475 billion in goods crossed between the regions in the first nine months of 2011. About 14% of revenue for the 500 biggest U.S. companies -roughly $1.3 trillion- comes from Europe”.

That said, at the end of the day the Europeans are responsible for less than 10% of our GDP! They are affecting mainly multinationals doing business in Europe. Putting it into prospective the retail sector, a sector we have recently written about where consumer spending is 60-70% of our economy. Making me think and ask, why have the developments and trends about holiday sales failed to generated the buzz the European debt crisis did? Aren’t we talking about a significant leading economic indicator?

I am not suggesting that the above is a complete analysis of the entire US – European relationship. These numbers don’t include a likely decline in European tourists coming to America staying in our hotels and spending in our stores. A stronger dollar will also cause US corporate sales in Europe to decline as it makes our products less competitive. Nor am I trying to ignore the impact Europe may have on our banking system. (I believe the banks have serious European debt exposure and our regulators don’t have a handle on the banks and don’t have real numbers dealing with the exact amount US banks are truly exposed to European debt).

American Economy

Uncle Sam gifted me some Fannie Mae shares and instructed me to reinvest all the dividends. I was 13 years old then and have no idea what the value of those shares were when they were gifted to me.
Do I go back in history and check the price of the shares on that date? Do I go to the nursing home and ask Uncle Sam what he paid for the stock? Or, do I make something up within reason.

Yikes what a mess! There are several solutions:

• Don’t sell the shares and forget about the problem.
• Sell the shares and make up a number, the IRS might not like that too much and neither will you if they ask for proof.
• Try and find his broker who may also be in the nursing home or if for all you know in jail and all his firm will do for you is let you communicate with their computers.

The following is a more intelligent narration with better answers. Keep your sense of humor, the IRS looses papers and so can you! I strongly suggest that before booking capital gains or capital losses, you consult with your tax adviser.

Dividend Reinvestment Programs DRIP
Many people invest in dividend producing stocks. They have their dividend issued to them in the form of additional shares of the same company. This is called a dividend reinvestment program also known as a DRIP. How do you calculate your cost basis if you are participating in a DRIP? Furthermore if you received the shares at different prices, how do you add this to your cost basis?
This scenario does get a little bit complicated.
To begin, take all your long term purchases (stocks held over a year) and add the costs together. You have then formed an average cost basis for all your long term investments. You will then take all your short term purchases (stocks held for less than 12 months) add those cost together and you will have formed an average costs basis for your short term investments.
You will then deduct long term cost from long term sales and the short term cost from the short cost sales. This will give you your cost basis for your DRIP investments.

Inheritance
Many people wonder what is the cost basis for stock that has been inherited? Your cost basis is the market value of the stock on the day the original owner passed away.

Gift
Many people wonder what is the cost basis for stock that was gifted to me? If you received stock as a gift, then the cost basis is the original purchase price of the security.

Donation’s
What about donating stock? If you chose to donate stock the entire amount donated is considered a deduction

In all scenarios keep in mind that stock splits may cause further complications. Look on the internet and company websites for a genealogical tree listing cost basis affecting events. It is a good idea to write down the price of the stock on the date in question. Chances are your broker will not have any records for you in the future. As time passes it will be much more difficult to track down this information.
Say you didn’t keep track of your basis and have lost all of your transaction statements. What should you do?

1. The internet is a valuable tool when looking to obtain such information you can go to Google historical prices or similar services
2. You can go to the library, visit the microfilm room, and find an old business newspaper like a Wall Street Journal
3. Find out who the company doing the dividend purchases is and ask them for the information. Compushare, is one of the popular ones.
4. The accountant may have some old statements

Its the time of the year to review your portfolio to identify any dogs among your investments. These pound puppies and kitties can be worth real money to you, if you take advantage of them. These dogs that you thought at the time you invested in them were golden can be worth tax dollars to you, if you sell them before the end of the year. With stocks it may be to your advantage to take the loss and move on.

This year has been an exceptionally turbulent year. We have had the Euro crash, continuing stalls in the debt reduction here in the USA and various other market moving meltdowns. To say this market was exciting is an understatement. We are now at the end of this jittery year and it is time for you to harvest your capital losses.

Let’s take the following example to explain the concept of “harvesting” a capital loss: Let’s assume that you bought 1,000 shares of Social Media Buzz Corp. for which you paid $5 per share. Here you hit it big and right now, that investment is worth $50,000. You now have a sizeable gain.

Now assume you bought 1,000 shares of UnSocial Media Buzz Corp. at $50 per share. As it turns out they had much stock market buzz but little to no media. The stock tanked and right now, your $50,000 investment is worth less than $5,000. Now you have a sizeable loss. So typically, hope kicks in and a little voice inside your head starts saying UnSocial Media Buzz Corp will surly come back and you will recoup all your losses, don’t sell now!

One practical approach may be to sell both stocks. In that manner your gains would go against your losses saving you from paying taxes on the profit.

At times you can get lucky, and if the price of both companies stays the same for the next month you can even buy back both position s after 30 days and adjust your cost basis accordingly. If you do buy it back before 30 days you will have violated the wash sale rules and your deduction will be disallowed.

Please beware of the wash sale rules, and as always, I strongly suggest that before booking capital gains or capital losses for the 2011 tax year, you consult with your tax adviser. You might also find some help by downloading IRS Publication 550, “Investment Income and Expenses (Section 4 Capital Gains and Losses).” You can find there additional information as well as other IRS Publications.

Too many people take a reactive lax approach to taxes leaving it to their accountants. However, it is those that take a proactive approach and discuss with their accountants different ideas that often pay far less taxes. Ultimately, it’s not what you earn but what you end up keeping after taxes that is important!