ETFC reported 2Q19 EPS of $0.90; ex. losses related to balance sheet repositioning and provision benefit, core EPS was $1.12, vs. our est. of $1.08 and cons. of $1.09. Vs. our forecast, beat was driven by higher NII (+$0.03) and service charges & fees (+$0.03), partially offset by higher expenses (-$0.03). See page 2 for detailed variance. Bottom line: Despite some investor concerns on mixed 2Q trends, we would note that weaker organic growth was partially driven by more pronounced tax pressures, and there is some impact on expenses from 2Q seasonality. We are also very encouraged by ETFC’s decision to reposition the balance sheet which should provide a nice lift to earnings (note: we have been advocating for this strategy for some time; see recent Weekly Chu). We raised our 2020E forecast to reflect lower sharecount; PT to $54 (from $53); Maintain Outperform.
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1-10 out of 48This week our Diversified Banks & Brokers Index was flat, tracking in line with the S&P Fins. with both lagging the S&P 500 (+1%). Our relative outperformers this week were GS (+3%) and LAZ (+3%). We are not surprised with GS’ outperformance as we are seeing investors warm up to our call (see our deep dive note). The biggest laggards were the Trust Banks as STT (-3%), NTRS (-3%), and BK (-2%) underperformed our coverage. YTD trends remain consistent, with SF (+45%), LPLA (+39%), and C (+38%) top three performers. STT (-12%), BK (-7%), and LAZ (-3%) round out the bottom three.
Investors myopically focused on 2Q results are not seeing the forest for the trees as the biggest question on investors’ minds is how the changing rate landscape will impact future earnings for 2020 (and beyond). Unfortunately assessing the impact of lower rates cannot be done in a vacuum as equity market levels, capital markets activity, retail cash levels, and credit losses will vary significantly under different macro scenarios. Given these complicating factors, we refined our previous late-cycle scenario analysis (see 2019 Outlook) and introduce three new scenarios to better capture the changing rate landscape: 1) Bull Case (insurance cut, market melt-up); 2) Base Case (3 cuts by mid-2020, choppy markets); and 3) Bear Case (garden variety recession incl. 6 cuts, 30% market correction, spike in credit losses).
This week our Diversified Banks & Brokers Index was up (+2%), tracking in line with the S&P 500 and S&P Fins. Within our coverage, the dispersion was fairly limited in a holiday shortened week. The best performers were NTRS (+4%), LPLA (+3%), ETFC (+3%), and AMTD (+3%), and the biggest laggards (which didn’t even lag all that much) were WFC, BAC, MS, STT, BK, RJF, SF, EVR, and LAZ which all posted (+1%) share performance. Looking at YTD trends, our top three performers remain SF (+44%), LPLA (+38%), and C (+37%) with BK (-5%), LAZ (-6%), and STT (-10%) rounding out the bottom three.
This week our Diversified Banks & Brokers Index was up (+1%) WoW tracking in line with the S&P Fins. and outperforming the S&P 500 by 100bps. Our index received a generous bump from the G-SIBs performance on Friday (+2% on average) following no objection from the Fed across the board on capital return plans. We outline the firms which surprise positively versus consensus payout estimates in our 2019 CCAR Results note and on slide 4. SF (+5%), GS (+4%), and NTRS (+4%) were the best performers this week while ETFC (-4%) and LAZ (-4%) lagged. The YTD leaderboard remains consistent with SF (+43%), C (+35%) and LPLA (+34%) the best performers and BK (-6%), LAZ (-7%), and STT (-11%) the biggest laggards.
This week our WR Banks & Brokers Index was flat WoW, in line with the S&P Fins. with both lagging the S&P 500 by 200bps. We received a healthy amount of inbound on the relative outperformance from LAZ (+6%) and underperformance at LPLA (-4%) this week. We dug into these names and provide insight to this weeks performance and outlook heading into 2Q print on slides 9-10. The YTD leaderboard remains largely consistent with SF +36%, LPLA +32%, and C +31% continuing to outperform our coverage and STT -12%, BK -8%, and LAZ -3% remaining our bottom three.
This week our WR Banks & Brokers Index was down -1% WoW, lagging the S&P 500 and S&P Fins. by 100bps. C (+3%) and BAC (+2%) were our relative outperformers, with Citi benefitting from WoW estimate revisions (+1%). STT (-2%) saw estimates revise down by -3% following guidance on NII, and it joins the eBrokers (-3%) as our relative laggards following disappointing monthly metrics. LPLA (+37%), SF (+37%), and C (+30%) continue to outperform the rest of our coverage YTD, while STT (-12%), LAZ (-9%), and BK (-5%) remain our worst performers.
This week our WR Banks & Brokers Index was up 5% WoW, offsetting last week’s decline of -5%, and outperformed the S&P 500 and S&P Fins. by 100bps. EVR (+14%) and LAZ (+10%) were relative outperformers, while we expect this trend within our coverage to continue for EVR, we do not have the same view on LAZ, which has garnered interesting feedback that we address on slide 4. Our relative underperformers this week were RJF (+1) and STT (+2%); we were surprised by the recent underperformance at RJF and go into further detail on slide 6. YTD performance ranking among the top three remained unchanged with LPLA (+37%) closely followed by SF (+36%), and C (+26%). LAZ benefited from a strong week but still remains in our bottom three per YTD performance (-7%), nestled in between STT (-10%) and BK (-6%).
This week our WR Banks & Brokers Index was down -5% WoW, lagging the S&P 500 (-3%) and S&P Fins. (-3%). Relative outperformers within our coverage include Citi and JPM which both preformed in line with the broader market (-3%). We explore Citi in greater detail on slide 5 which provides some context on this relative outperformance. The remainder of our coverage underperformed the market by 100-300bps with LAZ, EVR, LPLA, BAC, STT, and BK all at the lower end of the range. YTD trends remained consistent with LPLA maintaining pole position (+31%), followed by SF (+29%) and C (+19%). LAZ (-16%), STT (-12%), and BK (-9%) continue to increase distance from the rest of our coverage and solidify spots as the bottom three relative underperformers.
This week our WR Banks & Brokers Index was down -1% WoW, tracking largely in line with the S&P 500 (-1%) but lagging the S&P Fins. (flat). Relative outperformers within our coverage include LPLA (+5%), which benefited nicely from a strong showing at investor day (see note), as well as RJF (+3%), which likely benefited from the new disclosure provided in April's monthly metrics release (we explore this in greater detail on slide 4). LAZ was the key laggard this week, down (-4%) WoW. Overall, we saw modest reshuffling around the YTD performance league table, with LPLA (+39%) now leading the group followed by SF (+36%) and C (+24%). LAZ (-10%), STT (-7%), and BK (-4%) continue to languish in the bottom three, and given our less constructive 2Q earnings outlooks for each firm, we expect this group to remain the biggest laggards among in coverage.
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