Daily Management Review

American business giants start reporting on Q4, experts predict positive results


01/13/2017


Another corporate reporting season kicks off in the United States this week. During time, the largest public companies will be revealing their financial results for the fourth quarter of 2016, or even for the whole year. JP Morgan Chase, Bank of America and Wells Fargo have been the first to publish their quarterly figures. Later on, they will be followed by other issuers of the key sectors of the US economy. This period usually allows investors to assess prospects of individual companies and pick stocks for long-term investments.



Alex Proimos
Alex Proimos
Bank of America Corp.

Bank of America reported a 43% increase in quarterly profit, which also exceeded the average market expectations.

So, in the fourth quarter, net profit rose to $ 4.7 billion from $ 3.28 billion a year earlier. Earnings per share were 40 cents, beating the average forecast of analysts at 38 cents.

At the same time, revenues in the reporting period increased from $ 19.58 billion to $ 19.99 billion, while analysts expected $ 20.85 billion, on average.

JPMorgan Chase & Co.

Net profit of JPMorgan Chase & Co., the largest US bank, in the IV quarter of 2016 increased by 24% to $ 6.73 billion, or $ 1.71 per share, versus $ 5.43 billion, or $ 1.32 per share, in the same period a year earlier. The increase was achieved thanks to a substantial increase in income from operations with debt securities.

JPMorgan's revenue increased by 2% in the last quarter - from $ 23.747 billion to $ 24.333 billion.

Analysts, polled by FactSet Agency, forecasted earnings of $ 1.42 per share on revenue of $ 23.91 billion, on average. Results for the IV quarter include tax benefits of $ 475 million.

At the end of 2016, the bank received a record net income of $ 24.7 billion against $ 24.44 billion a year earlier.

"It appears that growth of the US economy is strengthening. For the future, there is a possibility of making good, rational, thought-out solutions that would spur economic growth, create jobs for Americans at all income levels, and we are well prepared to contribute into this,"- said JPMorgan’s CEO James Dimon.

Return on equity in the last quarter was 11% against expected 9%. 

Wells Fargo & Co.

Wells Fargo & Co, which in 2016 lost status of the US's largest bank by market capitalization. The reason for this was manipulations with customer accounts to over valuate indicators of banking products sales, reduced net profit and revenue. 

Net profit in October-December decreased by 5% to $ 5.3 billion, or $ 0.96 per share, compared with $ 5.6 billion, or $ 1 per share yoy.

Revenue declined slightly to $ 21.582 billion from $ 21.586 billion.

Experts polled by Thomson Reuters, on average, had forecasted net profit in the fourth quarter at $ 1 per share on revenue of $ 22.45 billion.

Wells Fargo’s net interest income increased by 7%, to $ 12.4 billion.

The bank’s division serving individuals and small businesses reduced net profit by 14% in the last quarter, to $ 2.733 billion.

Net profit in business services increased by 4%, to $ 2.194 billion in asset management. Taking into account the wealth management unit, it jumped to $ 653 million.

According to consensus forecast of analysts polled by FactSet, US corporations should please the market. At the end of the fourth quarter of 2016, experts expect growth of total profits of S&P 500 companies by 3.2%, their revenue - by 4.8% in annual terms. Earlier, third-quarter consolidated profit of S&P 500 issuers rose by 3.1% in annual terms, completing a cycle of falling that lasted five consecutive quarters. In the future, experts polled by FactSet, expect only positive dynamics. According to their estimates, S&P 500’s total profit will increase by 11% in the first half of 2017 and by 23.1% - in the second. All this creates conditions for a rally in the US market and further growth of stock indices in 2017, said Voya Investment’s senior market strategist Karyn Cavanaugh.

source: ft.com






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