Investment banks Goldman Sachs (GS) and Signature Bank (SBNY), as well as brokers Charles Schwab (SCHW) and Interactive Brokers (IBKR), began rolling out fourth-quarter earnings results early Tuesday. Bank stocks followed the overall market lower.
XBank and broker stocks face a mix of headwinds and tailwinds heading into the new year. As the Fed gears up to raise interest rates, many banks are poised to benefit from higher revenue from the loans they extend. At the same time, rising interest rates tend to decrease demand for certain types of loans — mortgages in particular. However, higher interest income for banks could also translate into more investment activity, which remains brisk. Interest rates jumped sharply on Tuesday.
Meanwhile, as inflation spikes and Covid omicron rages through the country, consumer spending slows.
On Jan. 14, JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC) reported better-than-expected Q4 results. JPM stock fell 4.2% on Tuesday, while Citigroup lost 2.4% and Wells Fargo declined 2.4%.
Bank Stocks: Goldman Sachs Earnings
Estimates: FactSet analysts expected Dow Jones component Goldman earnings to fall 4.8% year over year to $11.50 a share. Revenue was seen edging up 2.6% to $12.04 billion.
Results: Results on Tuesday showed earnings per share of $10.81, down 7.2% from a year earlier. Revenue rose 7.6% to $12.64 billion. For the full year, earnings came in at $59.45 per share, a 140% gain.
Stock: Goldman gapped down 7% to 354.40 on the stock market today to the lowest level in seven months. GS stock has had a cup-with-handle buy point of 412.76, according to MarketSmith chart analysis, but that is likely no longer be valid.
Its relative strength line is trending lower. Its RS Rating is 71 out of a best-possible 99, while its EPS Rating is 93.
Broker Stocks: Charles Schwab Earnings
Estimates: Views were for Charles Schwab earnings per share of 88 cents, 19.1% higher than the year-ago period. Revenue was expected to come in at $4.79 billion, a 14.8% increase.
Results: Schwab reported adjusted earnings of 86 cents per share, a 16% gain but two pennies below forecasts. A 13% revenue increase, to $4.71 billion, also stopped short of expectations. The results include TD Ameritrade from October 6, 2020 forward. Net interest revenue rose 19.2% for the quarter, and 30.2% for the year.
Stock: Schwab stock dropped 3.5% Tuesday to 92.16 on Tuesday. Schwab stock remains extended from a flat-base buy point of 84.59. Its relative strength line had been trending upward, but dipped on Tuesday. Its RS Rating is 96, and its EPS Rating is 92.
Broker Stocks: Interactive Brokers Earnings
Estimates: Analysts projected Interactive Brokers' earnings growing 19.8% year over year to 83 cents a share. Revenue was seen adding 11.8% to $669.8 million.
Results: Interactive reported after Tuesday's closing bell adjusted EPS of 83 cents, in line with estimates, on adjusted revenue of $683 million, above estimates.
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Commission revenue increased $32 million, or 11%, from the year-ago quarter on higher customer options and futures trading volumes and higher average per share commission in stocks, the company said in a statement.
Net interest income increased $70 million, or 31%, from the year-ago quarter on higher margin loan balances and strong securities lending activity.
Stock: Shares fell 3.8% to 71.93, after once again undercutting a cup-with-handle buy point of 73.41. The stock is flashing a sell signal because it round-tripped a 13% gain and has fallen through its 50-day line.
Interactive Brokers' relative strength line is sloping down. Its RS Rating is 73, while its EPS Rating is 92.
Bank Stocks: Signature Bank Earnings
Estimates: Signature Bank earnings were seen jumping 20.9% from the year-ago quarter to $3.94, while sales were expected to surge 31.1% to $549.7 million.
Results: Earnings jumped 33% t0 $4.34 per share. Net interest income increased nearly 36%, to $535.9 million. The bank cut its credit loss provision by more than 80%, to $6.9 million, due to "improved macroeconomic conditions."
Stock: Shares fell 2.7% to 355.70 on Tuesday. SBNY stock is slightly extended from a 342.13 cup-base buy point. SBNY stock's relative strength line is trending up. Its RS Rating is 98, while its EPS Rating is 84.
Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
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