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U.S. Banking Weekly Notes: JPMorgan, Goldman, Citigroup and State Street

Source: FORBES — Bank shares edged lower over the course of last week, as continued concerns about a possible default by Greece and an uneventful Federal Reserve policy meeting hurt share prices for the sector. The week started on a poor note as Greece struggled to reach a deal with its creditors, as talks appeared to have stalled. To make things worse, a poor bond trading performance reported by Jefferies for the March-May quarter pointed to similar woes for the country’s largest banks as they report their Q2 results in early July. But investors turned their attention to the Federal Reserve meeting slated for Wednesday, June 17, and hoped for clarity about the impending rate hike from the regulator. The optimistic tone employed by the Fed supported the conclusion that benchmark rates will most likely be hiked later this year – driving gains on Thursday. However, the trend reversed on Friday with Greece’s continuing woes again taking center-stage in investors’ minds.

The KBW Bank Index lost almost 1% of its value over the week – underperforming the S&P500 index which gained 1% over the same period.

JPMorgan and Goldman Sachs

Goldman Sachs has reportedly replaced JPMorgan as the U.K. government’s advisor in selling off its remaining stake in RBS and Lloyds. JPMorgan had been privatization-strategy adviser to the U.K. Financial Investments since 2013, and has helped the British government sell a bulk of its stake in Lloyds over the period. Incidentally, the appointment of Goldman to the pivotal role comes within weeks of Chancellor George Osborne’s decision to begin the process of returning RBS to the private sector.

Trefis has a $67 price estimate for JPMorgan’s shares, translating into a $250 billion market cap. This is slightly below the market price around $68 seen over the week. We estimate the company’s FY 2015 revenues to be $103 billion for earnings per share of $6.15, compared to a consensus of $5.78 according to Reuters.
Trefis has a $200 price estimate for Goldman’s shares, translating into an $90 billion market cap. This is about 5% below the market price around $213 seen over the week. We estimate the company’s FY 2015 revenues to be around $36 billion for an earnings per share of $17.92, compared to a consensus of $17.13 according to Reuters

Citigroup
Citigroup is shifting the base of its retail operations in the European Union from London to Dublin in response to the growing possibility of the United Kingdom ending its EU membership. Citigroup will not move the management of its U.K. retail operations to Dublin, though, with the 400-strong team in London remaining in place. The shift by the geographically diversified banking group is the first by a major global bank, as peers including HSBC, Standard Chartered and JPMorgan mull a similar move.

Trefis has a $58 price estimate for Citigroup’s shares, translating into a $176 billion market cap. This is slightly ahead of the market price of $56-57 seen over the week.
We estimate the company’s FY 2015 revenues to be around $79.2 billion for an earnings per share of $5.24, compared to a consensus of $5.35, according to Reuters.

State Street

State Street received a “Wells notice” – a letter from the SEC of an impending enforcement action against it – for its use of consultants and lobbyists in soliciting the asset servicing business of public retirement plans. The custody banking giant had revealed last November that it was under investigation by the U.S. Department of Justice (DoJ) as well as the SEC over this practice. Although the Wells notice in itself does not necessarily mean that the bank will face charges from the regulator, the bank could end up paying a sizable fine in the worst case scenario.

Trefis has a $81 price estimate for State Street’s shares, translating into a $33 billion market cap. This is slightly ahead of the market price between $79-80 seen over the week.
We estimate the company’s FY 2015 revenues to be around $11 billion for an earnings per share of $5.04, compared to a consensus of $5.16 according to Reuters.

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