USB US Bancorp

   (FROM THE WALL STREET JOURNAL 1/14/16) 
   By John Carney 

It has been a chilly new year for banks.

Shares of many have been hammered in recent weeks. The KBW Nasdaq Bank index is off by nearly 20% since its most recent peak of the past year. Shares of all 10 of the biggest U.S. banks have fallen by more than 5% in January alone.

This may have left some investors with a sense of deja vu. Bank shares tumbled at the start of last January as well, only to rally. Could the pessimism about banks once again be prelude to a rally?

The answer to that question may turn on comments of top bankers when they announce fourth-quarter results. First up is J.P. Morgan Chase & Co. on Thursday. Wells Fargo & Co., Citigroup Inc. and U.S. Bancorp follow on Friday.

J.P. Morgan is expected to report earnings per share of $1.27, a 6.7% improvement from a year earlier.But that is 14% lower than what analysts were forecasting for the quarter just six months ago.

Since then, shares of J.P. Morgan are down almost 13%.

With expectations and share prices lowered, investors can hope the bar will be easier to clear.

A weak capital-markets environment will likely result in low revenues from J.P. Morgan's fixed-income, currency and commodity trading unit.

And despite the Federal Reserve rate increase late in the fourth quarter, low long-term bond yields threaten to keep net-interest margins flat at best.

Debt underwriting also is likely to look weaker thanks in part to a strong quarter in the prior-year period. And trading revenue could be hampered by volatility of the sort that caused investors to sit on their hands. One possible bright spot: Equity underwriting and merger-advisory fees could come in stronger.

In other words, results are likely to be a mixed bag, but without big surprises. That, coupled with the fact that sentiment on the sector is pretty sour, means it may not take too much improvement to kindle some investor warmth toward bank stocks.

(END) Dow Jones Newswires

January 14, 2016 02:47 ET (07:47 GMT)

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