Banking on a win

Just like the cyclosporiasis infections sweeping the US, earnings are exploding into the news this week.

It all begins with the five of the biggest banks in the country: Bank of America, JPMorgan, Wells Fargo, Goldman Sachs, and Citigroup are dropping their latest reports tomorrow morning in what’s being hailed as “Super Tuesday.” But with so many numbers suddenly swamping investors’ news feeds, it might be handy to know what to look for ahead of time.

Big money

Two of banks’ biggest business lines—trading and M&A fees—are set to impress once again in Q2.

The war with Iran continued to cause some serious market volatility in the second quarter—upheaval that investors, particularly retail traders, have taken advantage of—which should help Wall Street keep its hot streak of strong trading gains intact. Combined revenue from trading at the six biggest banks in the country (the five above, plus Morgan Stanley) rose to nearly $50 billion last quarter, and analysts expect more of the same this quarter.

It’s also been a great quarter for deals and IPOs, which give banks juicy fees. Goldman Sachs led the charge for the SpaceX debut, but Morgan Stanley, JPMorgan, Citigroup and Bank of America will all get a piece of that extremely profitable pie.

Buy the rumor

The problem is that all of the positive vibes above are well-telegraphed, meaning that even strong earnings reports could be sell-the-news events. But one bank that’s recently been left behind by its Wall Street peers could be ready for a comeback that hasn’t already been priced in.

Citigroup is in the midst of a multi-year turnaround featuring a massive reduction in management layers and the consolidation of several company divisions that have begun to yield dividends. Last quarter, the bank reported its highest revenue in a decade, while its return on tangible common equity—a key financial metric for judging financial stocks—rose to its highest level since 2021. Despite the recent wins, Citigroup’s forward P/E ratio is among the lowest of the big banks.

That might turn this laggard into a leader after earnings arrive, but all of Wall Street looks set to announce some big wins tomorrow morning.—MR