For Immediate Release

Chicago, IL – July 14, 2015 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the JPMorgan Chase & Co. (JPM), Wells Fargo & Company (WFC), Citigroup Inc. (C) and Bank of America Corp. ( BAC).

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Here are highlights from Monday’s Analyst Blog:

Will Banks Start Q2 Earnings with a Whimper?

The rear view mirror is most likely to show a bumpy road in the core operating environment as banks kick off Q2 earnings tomorrow. But the market’s key focus will be on how the industry has shaped up to deal with Greece, China and interest rate issues.

Trading business, which had buoyed up the banks’ first-quarter earnings, has been primarily hurt by weak activity. Despite continued uncertainty surrounding Greece and China that should have ideally propped up trading activities, tighter regulation and a risk-averse approach kept many people off financial activities.

Trading in FICC (fixed income, currencies & commodities), in particular, was hugely affected and the Wall Street biggies are expected to report a significant year-over-year decline in trading revenue for the quarter.

Even if trading volumes remain flat or expand marginally, this will have little effect on revenues thanks to customers’ increasing preference of electronic trading to save charges.

Mortgage business on the other hand might look slightly upbeat in Q2. This is because, a low rate environment encouraged people to refinance home loans. While there were fewer avenues for fresh originations, volume of origination wasn’t bad either. But the overall declining trend of outstanding mortgage loans is expected to continue, as the rate of mortgage originations is yet to beat the rate at which mortgage loans have been repaid or charged off.

The concerns over sharply lower oil prices and a strong dollar that serve to dampen economic growth might have also kept demand for loans subdued.

On the investment banking front, with M&A activities nearing the record set in the second quarter of 2007, advisory and underwriting revenues should show improvement. However, the equities division might witness a slowdown due to cautious steps by investors amid uncertainties surrounding the global economies and domestic interest rate environment. This, along with weakness in rates and seasonality, could lead to an overall decline in investment banking revenues.

Nevertheless, the absence of anything astronomical on the legal expense front and overall continued cost containment through reorganization might bring some respite. Performance by the asset management segment is not expected to disappoint either.

Though the quarter might see deterioration in earnings compared with the previous quarters, we don’t expect too many banks missing earnings estimates. This is because farsighted analysts have already accounted for the adverse impact by revising their estimates downward.

Considering the S&P 500 universe, the broader Finance sector – of which U.S. banks are part – is expected to witness 2.6% year-over-year growth in earnings. This compares unfavorably with a 16.5% increase last quarter.

(For a detailed look at the earnings outlook for this sector and others, please read our Earnings Trends report.)

Will the Frontrunners Beat or Miss?

Our proven model doesn’t conclusively predict earnings beat for some industry leaders this time around. According to the Zacks methodology, a stock needs to have both a positive Earnings ESP and a Zacks Rank #3 (Hold) or better for an earnings surprise call.

Earnings ESP is our proprietary methodology for identifying stocks that have the best chance to surprise with their upcoming earnings announcements. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate.

Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.

Here are the expected numbers from four major banks reporting this week:

JPMorgan Chase & Co. (JPM)

This Zacks Rank #3 banking giant is scheduled to set the Q2 banking earnings season rolling before the opening bell on Jul 14.

• Zacks Consensus Estimate (earnings per share): $1.45 (versus $1.46 reported in Q2 2014)

• Zacks Consensus Estimate (revenues): $24.4 billion (versus $23.8 billion reported in Q2 2014)

• Earnings ESP: -1.38%

We can’t conclusively predict an earnings beat for JPMorgan as it doesn’t have the right combination of the two key ingredients.

Wells Fargo & Company (WFC)

This Zacks Rank #3 company will also release Q2 results with JPMorgan on July 14, before the opening bell.

• Zacks Consensus Estimate (earnings per share): $1.04 (versus $1.01 in Q2 2014)

• Zacks Consensus Estimate (revenue): $21.5 billion (versus $20.7 billion in Q2 2014)

• Earnings ESP: +1.92%

So Wells Fargo is likely to beat the Zacks Consensus Estimate as it has the favorable combination of Earnings ESP and Zacks Rank.

Citigroup Inc. (C)

This banking bellwether, which also carries a Zacks Rank #3, is scheduled to release its Q2 earnings before the opening bell on Jul 16.

• Zacks Consensus Estimate (earnings per share): $1.35 (versus $1.24 in Q2 2014)

• Zacks Consensus Estimate (revenues): $19.2 billion (versus $18.8 billion in Q2 2014)

• Earnings ESP: -0.74%

Citigroup also doesn’t have a favorable combination, so less likely to beat on Q2 earnings.

Bank of America Corp. (BAC)

This Zacks Rank #3 company will release Q2 earnings on Jul 15, before the opening bell.

• Zacks Consensus Estimate (earnings per share): 36 cents (versus 31 cents in Q2 2014)

• Zacks Consensus Estimate (revenues): $21.3 billion (versus $21.6 billion reported in Q2 2014)

• Earnings ESP: 0.00%

We are not confident of an earnings beat for Bank of America either.

Bottom Line

While the releases over the next few days will reveal how the quarter fared for the industry, the overall expectations remain on the pessimistic side. So, it is advisable for investors to stay away from the banking stocks ahead of their earnings releases.

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JPMORGAN CHASE (JPM): Free Stock Analysis Report
 
WELLS FARGO-NEW (WFC): Free Stock Analysis Report
 
CITIGROUP INC (C): Free Stock Analysis Report
 
BANK OF AMER CP (BAC): Free Stock Analysis Report
 
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