Financial Advisors Focus on Bank of America Among Big Banks That Reported Q3 Results

It’s that time of the year when investors and Financial Advisors start focusing on companies’ earnings reports, in order to see how the companies performed during the third quarter and make projections about their outlooks. TrackStar, Investing Channel’s official newsletter capturing and analyzing the trends of Financial Advisors, compiled the list of the 20 most searched tickers among financial advisors between October 8 and October 14, which showed that Financial Advisors kept the companies that started posting their financial results on the radar, as well as other firms, such as Apple Inc (NASDAQ:AAPL), which maintain its top spot as updates regarding its two latest iPhones continue to pour in. Bank of America Corp (NYSE:BAC) was propelled to the second spot on the back of its third-quarter results, after having taken the seventh and ninth spot in the previous two weeks, respectively. Other two big banks that reported their financial results, Wells Fargo & Co (NYSE:WFC) and Citigroup Inc (NYSE:C) ranked much lower: on the 14th and 15th positions, respectively.


Netflix, Inc. (NASDAQ:NFLX), whose ticker is also an often presence on the list of the 20 most searched tickers, ranked on the fifth spot as the company was scheduled to report its results on October 16. Financial Advisors also kept an eye on Financial Select Sector SPDR Fund (NYSEARCA:XLF), an Exchange Traded Fund, whose top five holdings include four banks that posted their results last week. XLF ranked as last week’s third most-searched ticker.


Overall, the main stock market indexes inched higher last week. The Dow Jones Industrial Average gained 0.43%, helped by a lift from Wal-Mart Stores Inc (NYSE:WMT) on Tuesday on the back of the company forecasting a 40% growth in online sales next year and announcing a $20 billion buyback. The S&P 500 also picked up 0.15%, registering a jump on Tuesday on the back of an upbeat projection from Credit Suisse regarding the S&P 500 next year’s trajectory.


The strong start of the earnings season also helped the stock market last week. Even though just 6% of the companies in the S&P 500 posted their results by October 13, the majority of the companies managed to beat the consensus estimates for top and bottom lines, according to FactSet.


Let’s get back to Bank of America Corp (NYSE:BAC) and its third-quarter results. The bank managed to surprise the estimates, by posting EPS of $0.48 and revenue of $22.08 billion, compared to forecasts of $0.45 and $21.98 billion, respectively. Both EPS and revenue appreciated over the year, by 17% and 1%, respectively.


Bank of America Corp (NYSE:BAC)’s third-quarter report also showed that the bank is well-positioned to benefit from an increase in interest rates as the net interest income registered an increase of 9% on the year to $11.2 billion. However, over the quarter, net interest income inched up by just 1.6%, which was lower than some analysts expected, according to Bloomberg. Given that Bank of America is the second-largest business lender after Wells Fargo & Co (NYSE:WFC), it was expected that business lending will surge alongside the increased business sentiment that came following the outcome of the presidential election.


Its consumer banking segment registered an increase in deposits of 9% and an increase in loans of 8%, while the segment’s revenue advanced by 10% to $8.80 billion. Moreover, Bank of America Corp (NYSE:BAC) saw its return on average tangible common equity amount to 11.32%, while  return on average assets stood at 0.98%. Both metrics were just slightly lower than the targets the bank had set for itself of 12% and 1%, respectively.


Moreover, the bank did manage to cut its expenses, which inched lower by 2.5% on the year to $13.14 billion, helped by some steps taken by the management, including reducing the number of branches and employees. Bank of America Corp (NYSE:BAC) is targeting annual costs of $53 billion next year. Lower expenses also helped Bank of America keep its efficiency ratio at 59.5% in the third quarter, in line with the second-quarter result and lower than the 61.7% a year earlier. The bank had set itself to keep the efficiency ratio at under 60%.


On the back of the financial results, Bank of America Corp (NYSE:BAC)’s stock inched up by 1.70% on Friday. It performed better than Wells Fargo’s stock, which lost nearly 3% after the bank missed the revenue estimate and Citigroup Inc (NYSE:C)’s stock, which fell by over 3.40% on Thursday. Even though Citigroup beat the consensus estimates, some investors got worried over the increased cost of credit. The only other big bank that posted its results last week was JPMorgan Chase & Co. (NYSE:JPM), whose stock remained flat also following better-than-expected EPS and revenue.


What the third-quarter financial reports of the three major banks had in common was the drop registered in trading revenue. Bank of America Corp (NYSE:BAC) said its fixed-income trading revenue slid by 22% on the year to $2.15 billion, while Citigroup Inc (NYSE:C) and JPMorgan Chase & Co. (NYSE:JPM) saw their trading revenues slide by 16% and 27%, respectively.

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