Tuesday, July 16, 2013

What earnings season forecasts for Bank of America

Bank of America is set to release its second quarter earnings report early Wednesday, but some of the other big boys in the financial sector have already put out their results. Here's what Wells Fargo, JPMorgan Chase, Citigroup and Goldman Sachs' numbers could mean for our hometown bank.

1) Loan growth could be weak. Or actually in decline. The average of Wells, City and JPMorgan was a 0.2 percent decline from the quarter before, according to analysts at Barclays.

2) Mortgage performance could decline. We're reaching the end of the refinancing boom, and mortgage rates are inching up. Executives at the big banks have predicted a decline in their home loan businesses, and Bank of America is unlikely to be much different. Rights to service mortgages are going up, though, and Bank of America could announce that it will be selling more of them.

3) Investment banking could be strong. Goldman, JPMorgan and Chase all reported double-digit increases in investment banking fees, Guggenheim Securities wrote. Goldman did particularly well in debt offerings.

4) Capital could be an issue. Regulators proposed a rule this month that would require at least a 5 percent leverage ratio. Now, capital was an issue for Bank of America for awhile. It spent a year selling off assets to get the level up, and got a decent result on the last federal stress test. It's unclear, under the new proposal, where BofA will stand. Wells Fargo said it was already in compliance with the rule. JPMorgan indicated it was a hair under the mark. Bank of America is expected to get the question, and that could spark another round of debate over whether the bank is adequately capitalized.

5) Revenue growth will be important. Sure, it sounds obvious, but revenue has been up and down across the banking sector of late. Both Wells and JPMorgan were able to grow revenue this quarter, so investors will be looking for that in Charlotte, too.

So what's this add up to? Hard to say Bank of America's earnings, moreso than its peers, have been marked with extraordinary items and legal settlements galore. Reckon we'll see at 7 a.m.