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“NII improved $730 million from Q4, primarily due to higher rates. The net interest yield increased 16 basis points to 2.39% from Q4 as loan yields improved 17% while the rates we paid on deposits was flat at nine basis points.” –Bank of America (April 18)

The S&P 500 Financials sector was a focus sector for the market this past week, as the Federal Reserve Board increased the target range for the federal funds rate on Wednesday. Earnings for banks and other companies in the Financials sector are particularly sensitive to higher interest rates. Given this rate increase marked the third rate hike in the past six months, have analysts been increasing their EPS estimates for 2017 for banks and other companies in the S&P 500 Financials sector over this time frame?

The answer is yes. In terms of EPS estimate revisions, 38 of the 65 companies (58%) in the S&P 500 Financials sector have seen an increase in their mean EPS estimate for 2017 since December 31. Three of the four sub-industries in the Financials sector with the largest percentages of companies that have recorded an increase in their mean EPS estimate for 2017 (since December 31) are bank-related sub-industries: Investment Banking & Brokerage, Diversified Banks, and Regional Banks.

Sub-Industry Breakdown

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In the Investment Banking & Brokerage sub-industry, five of the five companies (100%) in this sub-industry have seen an increase in their mean EPS estimate for 2017 since December 31, 2016, led by Raymond James Financial (to $5.03 from $4.35) and Morgan Stanley (to $3.46 from $3.21).

In the Diversified Banks sub-industry, four of five companies (80%) have seen an increase in their mean EPS estimate for 2017 since December 31, 2016, led by Bank of America (to 1.80 from $1.64) and JPMorgan Chase (to $6.64 from $6.46).

In the Regional Banks sub-industry, nine of the 12 companies (75%) in this sub-industry have seen an increase in their mean EPS estimate for 2017 since December 31, 2016, led by Comerica (to $4.42 from $3.87) and Citizens Financial Group (to $2.45 from $2.19).

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Senior Earnings Analyst
John’s weekly research report, Earnings Insight provides analysis and commentary on trends in corporate earnings data for the S&P 500, including revisions to estimates, year-over-year growth, performance relative to expectations, and valuations. He is a widely used source for the media and has appeared on CNBC, Fox Business News, and the Business News Network. In addition, he has been cited by numerous print and online publications such as The Wall Street Journal, Financial Times, The New York Times, MarketWatch, and Yahoo! Finance.

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