JPMorgan Chase gets the bank reporting period underway this week, as it is scheduled to release its fourth quarter results on Friday.
While analysts are less bearish on JPMorgan than they are on other banks, few are betting on a huge revenue breakout. The entire industry remains revenue challenged and few would be surprised if the fourth quarter tracked well with the third quarter in terms of earnings, which is to say that the all-industry performance was pretty rotten.
Unsurprisingly, as we've noted, the analysts have been busy slashing their estimates. JPMorgan analysts for example just cut their investment bank earnings per share estimates for 2011, 2012 and 2013. Goldman Sachs bore the brunt of estimate cut. For 2011, the analysts reduced estimates for the gilded bank 37 percent. Ouch.
Brad Hintz of Alliance Bernstein last week slashed his estimate for Goldman's fourth-quarter earnings from $3.15 to $0.77 a share and his Morgan Stanley estimate from a loss of $0.19 cents to a loss of $0.75 cents a share, notes the Financial Times. The paper also makes the astute point that while there are very few can't-miss drivers of earnings, there is a likely a big drag on earnings coming in the form of debit valuation adjustments.
Last quarter, banks benefited from widening credit spreads, which translated into accounting gains. This time, the narrower spreads will have the opposite effect. All in all, JPMorgan may end up faring better than most. The average estimate is in the $1.17 per share range on a slight revenue drop. Hopefully, the downside surprises will not be extreme. Investment banks will likely fare worse than commercial banks.
For more:
- here's the article
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