Tomorrow's Bank of America earnings release spooks bank stocks today

04/14/2011 6:06 pm EST


Jim Jubak

Founder and Editor,

Be afraid. Be very afraid.

Of Bank of America’s (BAC) earnings report for the first quarter of 2011 scheduled for release tomorrow, April 15, before the market opens in New York.

Worries about what the bank will say tomorrow are, in my opinion, what sent bank stocks down in today’s session. Today JPMorgan Chase (JPM) dropped 2.8%. Wells Fargo (WFC) fell 1.7%. And Bank of America itself was down 1.1%.

Wall Street analysts are expecting the bank to report net income of $2.87 billion for the quarter. That would be up very slightly from the $2.83 billion in net income in the first quarter of 2010.

I think, as with JPMorgan Chase, that Bank of America could actually beat on the earnings line thanks to the release of reserves against bad loans.

But the likelihood is that the revenue line will be ugly. Really ugly.

Analysts are now projecting revenue for the quarter of $26.69 billion. That would be a 19% drop from the first quarter of 2010.

The revenue numbers from trading will look especially bad, I think. In 2010 Bank of America had an extremely strong first quarter in trading with revenue of $7.05 billion. That’s going to a tough comparison because Bank of America, like its industry as a whole, has seen trading revenue fall in the fourth quarter and, quite probably, in the first quarter as well. Fourth quarter 2010 trading revenue came to just $2.58 billion.

Oddly enough, it’s quite likely that shares of Bank of America won’t take the most punishment in the banking sector if the company delivers the ugly quarter that everyone now expects.

After all everyone does expect it.

But bad news from Bank of America is likely to convince investors that other banks, with higher expectations than those surrounding Bank of America, are going to report weak quarters as well. And not everyone now expects that.

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund, may or may not now own positions in any stock mentioned in this post. The fund did not own shares of JPMorgan Chase, Wells Fargo, or Bank of America as of the end of March. For a full list of the stocks in the fund as of the end of March see the fund’s portfolio at

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