Earnings Tidbits
I have long used earnings transcripts, specifically the analyst Q&A, as insight into tough topics and questions surrounding a particular company or sector. For most transcripts, the initial portion of the call can sometimes contain ‘fluff’ and ‘spin’ from the company executives. Though informative, you have to keep in mind that the company representatives are well-versed in delivery. The later portion, the Q&A, allows analysts from other companies to delve deeper into an aforementioned topic or bring up an area of concern.
Bank earnings are underway. An interest rate increase from the Federal Reserve significantly and directly impacts banks. As such, here are some snippets from the earnings’ call from a few financial institutions.
JP Morgan: Marianne Lake, CFO- “…we are expecting retail deposit to reprice higher and faster in this cycle than in previous rising rate cycles, given the competition so good high quality LTR compliant retail deposit, given the advancements in mobile banking, given the awareness in the general environment around low rates and the desire to participate in rising rates.”
Bank of America: Bruce Thompson, CFO- “At the end of the second quarter an instantaneous 100 basis point parallel shift and increase in rates would be expected to contribute roughly $3.9 billion in NII benefits over the following 12 months and that split roughly 60% to short-end rates and 40% to long-end rates.” (My thoughts…although an instant and parallel shift of 100 bps is highly unlikely, it describes the interest rate sensitivity of BAC’s portfolio. This amount is notable.)
PNC Bank: Rob Reilly, CFO- “Look we and the rest of the market are going to feel our way around to figure out what is going to move balances or not for the first movements, so it is not as if we instantaneously change all of our prices if that is what your question is.” (In response to a question from an analyst regarding if PNC will be proactive in changing deposit rates in response to a 25 bps increase in the fed funds rate, or will they react to other banks)
Cory Nakamura CFA, CFP
Chief Investment Strategist and Financial Advisor
CFA Charterholder
CERTIFIED FINANCIAL PLANNER™ professional
Honolulu|Hawaii
CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, Certified Financial Planner™ and CFP® in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
Transcripts provided by www.seekingalpha.com
Analyst Disclosure: All pricing is as of the close of market for the securities discussed, unless otherwise stated. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. The recipient of this report must make its own independent decisions regarding any securities or financial instruments mentioned herein. Past performance is not indicative of future performance.
Investment Advisory Services offered through Mosaic Pacific Investment Advisors, LLC.