Are the Big Banks Back?
07/19/2012 7:30 am EST
From the current earnings reports, all the major banks have had quite a quarter...and while they've run quite a bit, there may still be some upside left, even though they may never reach the heady levels of years past, notes Chris Preston of The Daily Profit.
Bank of America’s (BAC) 2012 resurgence rolls on after Wednesday morning's stellar earnings announcement.
The formerly beaten-down big bank swung to a profit last quarter after reporting second-quarter earnings of $2.46 billion. That’s a sharp turnaround from the $8.83 billion loss the company suffered in the same quarter a year ago. The 19 cents per share of earnings is also higher than the 14 cents a share most analysts were expecting.
Entering the day, BAC shares were up a whopping 42% for the year. Still, considering how hard the stock was hammered for so many years, this type of bounceback seemed inevitable regardless of earnings.
Less than four years ago—just before the recession hit—BAC shares were trading at close to $40. In late 2007, the stock was well above the $50 level. So it’s actually amazing to think that BAC shares can now be had for less than $8 a pop even after gaining 42% this year.
The stock may never return to its 2007-2008 levels. That said, the bank’s run this year has been impressive. And the numbers from its recent earnings report were encouraging.
Revenue increased 66% last quarter. Expenses declined 35%, thanks in part to aggressive cost-cutting in its commercial lending, investment banking, and wealth management branches. Also, the bank’s loans to businesses increased to $267 billion.
With Bank of America having now reported, the big banks are now five for five this earnings season. That is, all five major US financials have beaten analysts’ earnings estimates.
Morgan Stanley (MS) will try and make it a perfect six for six when it reports earnings tomorrow.