The Q3 Earnings Season – Bank of America

2019-10-16 22:01    HotForex
The Q3 Earnings Season – Bank of America Institution Opinions 1

So far, for the major banks in the United States, 2019 has been a profitable year (as you can see in the below chart), however, last month’s fears of global growth both helped the banks but also dented their stock market performance.  Let’s see how.

Usually what happens in a mixed financial situation in the market is that investors will search for safe havens, and this is how the banks can use the opportunity to get more investors by selling them Gold,  having their cash as USD since the United States Dollar is one of the most popular safe havens, or sell them in a  Bond market rally – as BoA also has “Bank of America Corp.-Bond (US338915AM36).” So they can grow the cash and then it is their turn to use the funds.

Since last December’s market low, the BoA share price has mostly accrued and has not given the chance to new investors to log in to the market and buy the new shares. Ahead of the Q3 report today the market has been mixed and raised hopes for new investors to buy the shares at a lower price thanusual, however the question is: Will the Q3 earnings be an opportunity to pick up more shares for a longer-term investment? There are two key issues:

  1. Bank’s stocks are facing some pressure from the FED rate cut policy, however, subsidiary companies are generating substantial profits and using the cash generated to return massive capital to shareholders, so while rate cuts are a negative for the Banks at first, investors are optimistic in the long term.
  2. The BoA share price, compared to its competitors in the stock market, are cheap and that attracts more interest for buyers to invest in them, as the current price for BoA shares is lower than $30, compared to $120 for JPM and $202 for Goldman Sachs.

Note: Having a lower share price than competitors by itself does not technically mean that it is “cheap”, however, psychology often plays an important role and often attracts the attention of smaller or even new investors, especially.

While we are waiting for the Q3 earnings report of BoA today (before the US market opens), yesterday we had the reports of two other major banks:-

JPMorgan (NYSE: JPM) gained 2.2% after reporting strong earnings and record revenue, due to strength in the bank’s bond trading and underwriting businesses, as well as its credit card business.

Goldman Sachs (NYSE: GS) slumped 3% after posting earnings per share of $4.79, below consensus forecasts.

Technical overview:

The technical chart shows the trend in a very positive direction, while from the latest decline, it  has already recovered most of the loss and is now trading above the 88.6% Fib, while yesterday in the NY session it tested above $30 and 100% of the Fibonacci level. Immediate support level sits at $28.58,  its 50% Fib levels, as well as the crossline of EMA50 and 200 periods, S2 sits at $27.80, while $30 is a psychological level resistance to $31.90 and then all-time high at $33.05 as the next levels in the uptrend move.

Q3 Estimated by Zacks

EPS – $0.68, 12.12% YoY Decline

Revenue: $22.20 billion, 2.54% YoY Decline

The Q3 Earnings Season – Bank of America Institution Opinions 2

Click here to access the Economic Calendar

Ahura Chalki
Regional Market Analyst

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