The unofficial kickoff to the 20Q3 earnings season occurred today, Oct. 13, when the S&P 500 banks industry’s Citigroup Inc (C.N), First Republic Bank (FRC.N), and JPMorgan Chase & Co (JPM.N), delivered quarterly results. Analysts had been expecting declines in both net interest income (NII) and net interest margin (NIM) for the banks industry. However, expectations were too high for the large diversified banks sub-industry constituents, as both Citigroup and JPMorgan missed analysts’ expectations for these metrics. Citigroup reported NII of $10.49 B vs. the consensus of $10.61 B and NIM of 2.03% vs. an expectation for 2.17% while JPMorgan

Net interest margin (NIM), the difference between interest charged on loans and paid on deposits, is a key profitability metric for banks which has come under pressure given a decline in global growth expectations and a low interest rate environment. An undesirable outcome related to Brexit will likely add further pressure on interest rates, impacting future profitability. HSBC Group CFO Ewen Stevenson comments, “consensus is for a further rate cut at some point in the coming months … I think, is going to impact NIM negatively over time … I would think that NIM in the U.K. continues to gradually

The unofficial kickoff to the 19Q3 earnings season initiates Oct. 15, when the S&P 500 banks industry’s Citigroup Inc (C.N), First Republic Bank (FRC.N), JPMorgan Chase & Co (JPM.N), and Wells Fargo & Co (WFC.N) deliver quarterly results. Analysts have been increasingly bearish on banks heading into 19Q3 earnings season, and currently expect the S&P 500 banks industry to see 19Q3 YoY earnings decline 1.2%, net interest income to increase 0.6%, and net interest margin to contract 9.9 bps to 2.67%.  

The second quarter of 2019’s earnings season kicked off with a flood of bank earnings reports. Fourteen of the 19 companies within the S&P 500’s bank industry have reported 19Q2 earnings and revenue. While the majority of companies within the industry beat top and bottom line expectations, they fell short on some industry key performance indicators (KPI’s). Exhibit 1: S&P 500 Bank Industry YoY Growth Rates The S&P 500 bank industry is expected to see 19Q2 YoY revenue increase 2.9% and earnings increase 18.4%. Of the companies that reported, 78.6% beat revenue estimates, which came in 1.7% above expectations. The