Big Banks' Trading Outlook Indicates Mixed Q4 Performance

On Wednesday, at the 2018 Goldman Sachs (NYSE:GS) US Financial Services Conference in New York, top executives of Bank of America (NYSE:BAC) , JPMorgan (NYSE:JPM) and Citigroup (NYSE:C) presented the companies’ Q4 trading outlook.

At the conference, Brian Moynihan — chief executive officer at BofA — stated that the company’s capital markets revenues are likely to increase year over year in the fourth quarter. However, things might turn around, depending on activities in December. Furthermore, the bank is likely to keep benefiting from disposing excess capital using share buybacks.

At the same conference, JPMorgan’s CEO — Jamie Dimon — announced the company’s outlook for the fourth quarter per which trading revenues are expected to be flat year over year.

Meanwhile, contrary to peers, Citigroup’s chief financial officer John Gerspach commenting on the outlook said market revenues are likely to be low on a year-over-year basis, impacted by reduced fixed-income market revenue. However, Citigroup’s equity business is on an upswing.

"We had anticipated we would actually see year-over-year revenue growth in fixed income and equity markets," he said. "But while we've maintained, I'd say, good engagement with the clients, we just haven't seen that transition into transaction activity at the rate at which we had hoped."

Moreover, pressured market-sensitive revenues are likely to impact the bank’s aim of accomplishing its efficiency targets, per Gerspach. "The tight timeframe of having the ability to react could put us just a little bit short," he said.

Additionally, Gerspach expects investment banking revenues to be up sequentially on strong M&A though it might decline slightly year over year.

Conclusion

Banks are skeptical about the fourth quarter amid global market turmoil and uncertainty over ongoing developments, including easing of regulations along with expectations of slowdown in the economy and inflation worries.

Notably, shares of BofA, Citigroup and JPMorgan lost around 10.3%, 9% and 3.2%, respectively, in the last six months.

Among the abovementioned stocks, Citigroup and JPMorgan carry a Zacks Rank #2 (Buy) while BofA currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A top-ranked finance stock is Greenhill & Co., Inc. (NYSE:GHL) , which has been witnessing upward estimate revisions in the past 60 days. Moreover, this Zacks #1 Ranked stock has rallied more than 19% year to date.

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