Markets
Truist and Regions Beat Estimates, and Bank Stocks Rose on a Day the Market Fell
Regions Financial earned an adjusted $0.73 a share in the third quarter against $0.66 expected and Truist $1.16, both reported on October 16. Truist rose 1.07%, Regions 0.51%, JPMorgan 1.25% and Wells Fargo 1.35% while the S&P 500 lost 1.09%; the financial-sector ETF gained 0.45%.
Day four of the bank reporting season belonged to the regionals, and for once a beat was rewarded. Regions Financial reported net income of $611 million, or $0.71 a share; excluding $15 million of losses on securities it sold to reposition its portfolio, earnings were $0.73, against a consensus of $0.66. Diluted earnings per share rose 16% from a year earlier. Revenue of $1.97 billion was slightly short of the $1.99 billion expected, and net interest margin widened two basis points to 3.68%. The stock rose as much as 1.79% to $27.80 before closing up 0.51% at $27.45.
Truist's numbers need more reading. Reported earnings were $0.56 a share after $0.60 of what the bank called strategic actions, including the sale of an auto loan book and a securities repositioning; the adjusted figure was $1.16, with an adjusted return on tangible common equity of 14.6%. Whether that was a beat depends on the consensus used, which ranged from $1.05 to $1.17 across data providers. Investors read it as acceptable: the shares rose 1.07% to $47.07.
The contrast with Monday to Wednesday is instructive. Goldman Sachs, JPMorgan, Citigroup, Bank of America and Morgan Stanley mostly beat on profit and all closed lower on the day, Citigroup by 5.6% and Bank of America by 4.76%. The regionals, with smaller trading desks and lower expectations, beat by less and rose. Part of the difference is the bond market: the 10-year Treasury yield fell to 5.10% from 5.24% over the week, which lifts the value of the securities portfolios that every bank marked down when yields climbed.
Friday's session had the whole sector in the green while the index fell. JPMorgan rose 1.25% to $339.72, Wells Fargo 1.35% and Citigroup 0.85%; Goldman Sachs slipped 1.12%, Bank of America 0.91% and Morgan Stanley 0.84%. The Financial Select Sector SPDR (XLF) gained 0.45% and ended the week up 1.44%, a rare positive weekly return for a sector in a week when the S&P 500 lost 1.95%. Bank of America is still down 5.69% on the week and Morgan Stanley 4.97%.
The card companies are next: Visa reports on October 27 and Mastercard on October 29, after weekly gains of 4.45% and 4.80% that put both near record highs. The pattern of this season so far, where a beat is sold at the top of the range and bought lower down, is the thing to keep in mind.