JPMorgan, Wells Fargo, Citi to Report Earnings April 12
JPMorgan, Wells Fargo, Citi to Report Earnings April 12
The big banks will kick off earnings season
- Bank earnings on Friday, setting the tone for earnings season.
- JPM, WFC and C will report before the market opens.
- High implied volatility in bank stocks makes options attractive.
As usual, bank earnings are set to kick off the earnings reporting season, with J.P Morgan (JPM), Wells Fargo (WFC), and Citi (C) scheduled to report on Friday, April 12, before the market opens. The investment management company BlackRock (BLK) will report alongside those banks.
Earnings from big banks typically help set a tone for the market ahead of other reports from big tech names. The combined three names make up nearly 16% of the State Street Financial Select Sector SPDR (XLF), an exchange-traded fund (ETF), that analysts regularly use to evaluate the performance of the financial sector within the S&P 500. That said, Friday's market reaction to the reports could be revealing.
Analysts’ expectations
The consensus figures for the respective bank earnings show that profits are likely to be nearly flat. This is due to subdued loan activity from the commercial and consumer sides amid high interest rates. On the other hand, the resilient U.S. economy and a robust labor market are likely to have helped trim the effects of higher interest rates.
Another positive for the big banks is the renewed initial public offering (IPO) market, with successful launches from Reddit (RDDT) helping to fuel speculation that more companies will list in the near to mid-term. Another factor to consider is how bond prices have dropped over the last few months, which could drag on bank balance sheets.
JMP is expected to report earnings per share (EPS) of $4.16 and revenue of $42 billion. WFC is expected to report EPS of $1.08 and revenue of $20.1 billion. And C is expected to report EPS of $1.20 and revenue of $20.4 billion.
Trading bank earnings
Viewing implied volatility metrics reveals that JPM is trading with the highest implied volatility rank (IVR), at 60.8 as of April 8. However, WFC and C also have lofty IVRs at 50.8 and 56.6, respectively. For those wanting to take advantage of the IV crush from earnings, you could go with an iron condor or short strangle, although those strategies depend on prices staying within your short strikes. Selling a put or call spread offers a way to play earnings with a more directional approach that also offers a defined risk.
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
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