(Reuters) - Morgan Stanley (NYSE:MS) reported quarterly results on Thursday, rounding off an earnings season for big U.S. banks marked by across-the-board hit to profits from the U.S. tax overhaul.
A snapshot of the six big U.S. banks' results:
JPMorgan Chase & Co (NYSE:JPM)
Adj. EPS (beat) - $1.76 vs est $1.69
Revenue (beat) - $25.45 bln vs est $25.15 bln
Helped by: Interest income
Hurt by: Slowdown in trading revenue
Tax impact: $2.4 bln charge
Executive comment: "The enactment of tax reform in the fourth quarter is a significant positive outcome for the country. U.S. companies will be more competitive globally, which will ultimately benefit all Americans" - CEO Jamie Dimon
Analyst's take:
Credit Suisse (SIX:CSGN) - (rating: "outperform," PT: $120) JPM's Q4 print is noisy, but generally consistent with expectations; adds JPM is well positioned in 2018
Nomura - (rating: "neutral," PT: $115) Despite JPM's messy quarter/expense miss, FY18 tax guidance is slightly better than anticipated. While JPM shares have lagged the KBW Bank Index to start the year, shares could outperform, given favorable tax guidance RBC - (rating: "outperform," PT: $110) JPM's Q4 core performance was generally steady with continued improvement in net interest margin and lower-than-expected credit costs
Compass Point - (rating: "sell," PT: $100) Metrics in JPM's Q4 results were mixed, but largely disappointing
Wells Fargo (NYSE:WFC) & Co
EPS – $1.16
Rev – $22.1 bln
Tax impact - $3.35 bln gain
Helped by - One-time gain related to the new tax law
Hurt by - Higher-than-expected non-interest expenses for 2017; $58.48 bln vs est $54.62 bln
Executive comment: "The only piece of that pro-growth agenda people can really sink their teeth into is that tax reform that just occurred ... I see a lot to like in it" CEO Tim Sloan
Analyst's take:
RBC - (rating: "outperform," PT: $60) Although there were many moving parts in WFC's Q4, overall revenue performance was underwhelming and suggests co has yet to fully move past its sales practice issues
Barclays (LON:BARC) - (rating: "overweight," PT: $75) WFC's 2018 expense guidance was "okay" ($53.5 bln-$54.5 bln vs. consensus at $53.7 bln)
BMO - (rating: "market perform" PT: $62) Despite WFC's 6 pct cost-driven Q4 miss, its forward estimates are essentially unchanged; broker remains bullish on banks
Evercore - (rating: "outperform," PT: $65) WFC's expectations for 2018 expenses in a range of $53.5 bln-$54.5 bln is positively below its estimate of $55 bln
Citigroup Inc (NYSE:C)
Adj. EPS (beat) - $1.28 vs est $1.19
Rev (beat) - $17.26 bln vs est $ 17.22 bln
Tax impact - $22 bln charge
Helped by - Growth in consumer banking, especially in Asia and Mexico
Hurt by – Charges related to the new U.S. tax law
Executive comment: "Tax reform is a clear net positive for Citi and its shareholders," - CEO Michael Corbat
Analysts' take:
Credit Suisse - (rating: "outperform", PT: $86) Citi's Q4 results "solid" relative to expectations, where fundamentals were just fine with revenue modestly above forecast in the Global Consumer Banking segment
Instinet - (rating: "buy", PT: $86) Despite mixed results overall, sees modest share outperformance given low expectations for Q4 2017 and better-than-expected Consumer credit trends. While tax guidance did not surprise and capital hit was slightly greater than anticipated, results prove "good enough" this quarter
RBC - (ratings: "outperform," PT: $79) Although significant non-cash charges related to tax reform obfuscated Q4 performance, underlying trends were generally "strong" and core results exceeded estimates
Bernstein - (rating: "outperform," PT: $84) Citi reported a messy Q4 results but its core trends came in a touch better. Modest upward inflection in Global Consumer growth (Mexico better) was a positive for Q4
Bank of America Corp (NYSE:BAC)
Adj. EPS (beat) - 47 cents vs est. 44 cents
Rev (miss) - $20.4 bln vs est. $21.53 bln
Tax impact - $2.9 bln charge
Helped by - 11 percent rise in net interest income to $11.46 billion
Hurt by - Tax-related charges, lower trading revenue compared with a year earlier, $292 million charge related to troubled South African furniture retailer Steinhoff International
Executive comment: Some tax savings would be funneled into technology investments but the bulk of the windfall would be returned to investors - CEO Brian Moynihan
Analysts' take:
Moody's analyst David Fanger - We consider BAC's results to be credit positive and consistent
Goldman Sachs Group Inc (NYSE:GS)
Adj. EPS (beat)- $5.68 vs est. $4.91
Rev (beat)- $7.83 bln vs est. $7.61 bln
Tax impact - $4.4 bln charge
Helped by: Investment banking revenue due to strong debt and equity underwriting
Hurt by: One-time charge related to the U.S. tax overhaul, a slump in trading revenue
Executive comment: "We are working intensely to achieve our $5 billion in strategic growth initiatives with an emphasis on growing earnings and returns" - CFO Marty Chavez
Analyst's take:
Credit Suisse - (rating: "neutral," PT: $267) GS' earnings were a mix of positives and negatives with investment banking and investing & lending both stronger and more than offsetting weakness in trading
Instinet - (rating: "neutral," PT: $238) Investment bank results surprised "positively". However disappointment on trading/continued share loss, coupled with lower-quality sources of earnings strength will result in share underperformance
JPMorgan - (rating: "overweight," PT: $278) GS' overall trading results disappointing, mainly in fixed income, currency and commodities client execution, even in light of known low volatility levels. Expects GS to operate with headwinds in Q1 (like Q4) compared to peers due to its business and client mix
JMP - (rating: "market perform") GS' core results were modestly better than expectation but not close to the magnitude of the headline beat
Morgan Stanley
Adj. EPS (beat)- 84 cents vs est. 77 cents
Rev (beat)- $9.5 bln vs est. $9.2 bln
Tax impact - $1.2 billion charge
Helped by: Underwriting revenue; Wealth management
Hurt by: Tax provision; Trading revenue
Executive comment: Morgan Stanley has met or exceeded all the goals laid out in early 2016 - CEO James Gorman
Morgan Stanley's bond trading revenue plunged 45 percent in the quarter, the business still delivered more than $1 billion in average quarterly revenue for the full year. Gorman has said the business needs to generate at least that much to be sustainable.
Analyst's take:
Argus Research - Investments in wealth management business and favorable equity market are helping MS lower earnings volatility, which should aid stock's valuation over time
Credit Suisse - (rating: "outperform," PT: $59) MS reported "solidly positive" Q4 results. MS' medium-term targets and 2018/2019 financial targets, which include wealth management pre-tax margin of 26-28 pct and expense efficiency ratio of <73 pct should be well-received
Compass Point - (rating: "sell," PT: $49) MS' reported a "beat" on both top and bottom line, driven by gains in investment banking and wealth management businesses
Nomura - (rating: "buy," PT: $64) Despite some pockets of revenue weakness, Q4 results showed key tenets of MS bull case. In the backdrop of difficult trading, MS' results are impressive and expect strategic review to reinforce the bull case