What to watch in big bank earnings reports
JPMorgan (JPM), Wells Fargo (WFC) and Citigroup (C) are scheduled to report quarterly results on April 13. What to watch for: 1. OUTLOOKS: Back in February, JPMorgan said it expects medium-term ROTCE of about 17%, a CET1 ratio of 11%-12%, a 55% overhead ratio and a 100% net payout ratio. The bank sees U.S. credit, debit card spending growing over 5% per year for the next five years, and said it expects FY18 net interest income to be between $54B-$55B. JPMorgan added it sees FY18 consumer card net charge-offs of 3.25%-3.5%, 2018 core loan growth ex-CIB of 6%-7%, and FY18 adjusted expense lower than $62B. During Wells Fargo's last earnings call, the company said it expects FY18 effective tax rate to be approximately 19% and that it was "on track" with $4B in expense reductions by end of 2019. Additionally, the bank noted it expects FY18 total expenses of $53.5B-$54.5B. Wells Fargo also expects to close 250 branches in 2018, and sees its total branch network declining to 5,000 by 2020. 2. HEALTHCARE JV: On January 30, Amazon (AMZN), Berkshire Hathaway (BRK.A, BRK.B) and JPMorgan announced that they are partnering on ways to address healthcare for their U.S. employees, with the aim of improving employee satisfaction and reducing costs. The three companies will pursue this objective through an independent company that is free from profit-making incentives and constraints. The initial focus of the new company will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost. Investors will be tuned in to JPMorgan's earnings call to hear if any additional color on this effort is offered. 3. FEDERAL RESERVE SANCTIONS: Responding to recent and widespread consumer abuses and other compliance breakdowns by Wells Fargo, the Federal Reserve Board announced on February 2 that it would restrict the growth of the firm until it sufficiently improves its governance and controls. In addition to the growth restriction, the Board's consent cease and desist order with Wells Fargo requires the firm to improve its governance and risk management processes, including strengthening the effectiveness of oversight by its board of directors. Until the firm makes sufficient improvements, it will be restricted from growing any larger than its total asset size as of the end of 2017. Commenting on the decision, Wells Fargo said it was confident it will satisfy the requirements of the consent order it agreed to with the Board of Governors of the Federal Reserve System. "We take this order seriously and are focused on addressing all of the Federal Reserve's concerns," said Timothy Sloan, Wells Fargo's president and CEO. 4. CRYPTOCURRENCY: Back in February, Bloomberg reported that JPMorgan and Bank of America (BAC) were stopping purchases of Bitcoin and other cryptocurrencies on their credit cards. JPMorgan does not want the credit risk associated with such transactions, the report added, citing spokeswoman Mary Jane Rodgers.