With the start of Q3 earnings next week and a light reporting schedule, banks look set to be in the spotlight all week particularly on Friday when pair of big box gambling houses, JP Morgan (JPM) and Wells Fargo (WFC), come out with their earnings before the market opens.
JPM is expected to report $1.21 while WFC $0.87 per share but it may be a combination of several factors that folks may want to know out of their earnings report and the conference… things like the profits source (trading or lending), loan growth, issue of declining revenue, QE3 impact, legacy lawsuits costs and projections…
Whatever these two would have to say will, by implication, affect the other big box gambling houses, particularly Bank of America (BAC) who has tentacles of JPMs trading house as well as WFCs mega-sized mortgage portfolio.
Both JPM and WFC have been in a slow rally mode for the last 3 months so the earnings reports and forward statements would be critical not just to confirm this rally but to move the whole market ahead where financials are still laggards.
Some of these banking names mentioned so far have hit some important technical levels on Friday but gave a negative signal later in the day when they reversed.
With an exception of JPM whose technicals favor a shot at $44, WFC and BAC are bumping against ceiling resistance. The space between Monday and Friday’s earnings would seem like a logical time horizon for these names to clear out some of the technical ambiguities and set a stage for a more clear move on Friday one way or another.
One other, less known, bank earnings report on Thursday may give us not just some regional flavor in this space but also a trading opportunity for those with stomach for excitement.
Bank of the Ozarks (OZRK) is suppose to report sometime on Thursday with expectations $0.55. With about $1.5 billion in value, OZRK operates mainly in Arkansas, some in Georgia and few branches in other southern states. The bank is looking to expand there as the region is experiencing population growth hence business opportunity.
OZRK has a low non-performing loan ratio of 0.5%, loan growth of 10%, net interest margin (difference what it costs them to get money and what they lend it at) at 5.84% and deposit base expansion in double digits which may grow more as they keep announcing small deals here and there.
In July, OZRK popped over 8% in one day after it reported its Q2 earnings and the shares, somewhat pricey, have been sideways since and has, on the technicals, bounced off the initial July gap up.
It is currently building up a 3-week bullish flag but inside this flag, the price action on September 14 is particularly worrisome because it is a failed attempt at a break through $35 as well as a top in the MACD momentum read which is at a lower high then the one in July.
With such technical set up, OZRK could move about $4.50 one way or another giving it a possible price range of circa $30.50 to circa $39.50.