Financials Weekly Notes: JPMorgan, Citigroup, Goldman Sachs And Barclays

-4.90%
Downside
9.08
Market
8.63
Trefis
BCS: Barclays logo
BCS
Barclays

Movements in bank share prices over the week largely mirrored what was seen across the equity market for the period. Investor hopes of a quicker economic recovery in Europe were fueled by news that the European Central Bank (ECB) is cutting short-term interest rates to a record low and is also looking to buy asset-backed securities. This, coupled with positive trends seen in key U.S. metrics over the week, helped the S&P 500 and Dow Jones indices scale record intra-day highs. The KBW Bank Index remained largely constant around 72 points for the period.

Below are some significant events pertaining to major banks that were witnessed over this week.

JPMorgan & Bank of America

Relevant Articles
  1. Barclays Stock Trailed S&P 500 By 23% In 2023, What Happens Next?
  2. Barclays Stock Is Undervalued
  3. Where Is Barclays Stock Headed?
  4. Barclays Stock Is Undervalued
  5. What To Expect From Barclays Stock?
  6. After Earnings Miss In Q2, Where Is Barclays Stock Headed?

JPMorgan (NYSE:JPM) is reportedly in talks to sell its oil-supply agreement with Philadelphia Energy Solutions to Bank of America (NYSE:BAC). ((J.P. Morgan in Talks to Sell Oil-Supply Agreement, The Wall Street Journal, Sept 2 2014)) The contract, which is a part of JPMorgan’s physical commodities business, allows the bank to receive refined fuel products in return for crude oil, and was initially a part of the bank’s deal with Mercuria (see JPMorgan Finalizes Sale Of Physical Commodities Unit For $3.5 Billion). Interestingly, as JPMorgan is looking to get rid of the contract in response to the increased scrutiny by regulators on the physical commodities units operated by the country’s biggest banks, Bank of America is likely putting itself under regulators’ scanners by taking up the deal.

  • Trefis has a $65 price estimate for JPMorgan’s shares, translating into a $245 billion market cap. This is about 10% ahead of the current market price of between $59-$60 seen over the week.
  • We estimate the company’s FY 2014 revenues to be $95 billion for earnings per share of $5.51, compared to a consensus of $5.52 according to Reuters

See our full analysis for JPMorgan | Bank of America

Goldman Sachs

Goldman Sachs (NYSE:GS) is currently working on plans to enter into the Islamic bond market by issuing a sukuk, or Islamic bond – making it only the second global bank to issue Islamic bonds since HSBC (NYSE:HSBC) did so in 2011. [1] The bank is expected to issue $500 million in five-year bonds later this year if all goes according to plan. Incidentally, this is Goldman’s second attempt at issuing a sukuk after the investment bank failed to do so in 2011. A successful issuance will allow Goldman to tap into a rapidly growing market which can be a strong source of funding for its operations in the future.

  • Trefis has a $185 price estimate for Goldman’s shares, translating into a $85 billion market cap. This is slightly ahead of the current market price of around $180 seen over the week.
  • We estimate the company’s FY 2014 revenues to be around $35.5 billion for an earnings per share of $14.53, compared to a consensus of $16.55 according to Reuters

See our full analysis for Goldman Sachs

Citigroup

Citigroup (NYSE:C) entered into an agreement to sell a network of 41 of its branches in Texas to BB&T early in the week. [2] The deal includes branches in Dallas, Houston, Midland and Odessa with $2.3 billion in deposits and $87 million in loans. The move is the latest by the globally diversified banking group to work its way through non-core assets housed under its Citi Holdings division. Notably, Citigroup had successfully sold 21 branches in Austin, Bryan-College Station and San Antonio with $1.2 billion in deposits to BB&T this June.

  • Trefis has a $58 price estimate for Citigroup’s shares, translating into a $176 billion market cap. This is roughly 10% ahead of the current market price of around $52 seen over the week.
  • We estimate the company’s FY 2014 revenues to be around $78.6 billion for an earnings per share of $4.24, compared to a consensus of $3.69 according to Reuters

See our full analysis for Citigroup

Barclays

Early in the week, Barclays (NYSE:BCS) detailed plans to sell its retail banking, wealth management and corporate banking businesses in Spain to the country’s third-largest banking group, Caixabank. ((Barclays announces further Barclays Non-Core disposals, Barclays Press Releases, Sept 1 2014)) The British banking giant will receive around €800 million ($1.05 billion) from the sale – representing a loss of £500 million ($800 million) which the bank will incur over the third and fourth quarters of the year. The sale is a part of its ongoing group-wide reorganization plan dubbed ‘Project Transform,’ which includes an exit from retail banking operations in France, Spain and Italy and a sizable reduction in global investment banking operations (see A Look At Barclays’ Revamped Strategy And Its Impact On The Bank’s Shares). It should be noted that the Caixabank sale does not include Barclays’ investment banking division.

  • Trefis has a $18 price estimate for Barclays’ shares, translating into a $74 billion market cap. This is roughly 20% ahead of the current market price of around $15 seen over the week.
  • We estimate the company’s FY 2014 revenues to be around $45.6 billion for an earnings per share of $1.04, compared to a consensus of $1.60 according to Reuters

See our full analysis for Barclays

See More at TrefisView Interactive Institutional Research (Powered by Trefis) | Get Trefis Technology

Notes:
  1. Goldman Sachs to issue its first Islamic bond, Financial Times, Sept 4 2014 []
  2. BB&T to acquire additional Texas branches from Citibank, BB&T Press Releases, Sept 3 2014 []