Bank towers in TorontoKevin Van Paassen
Two big U.S. banks reported their quarterly results this week - and while JPMorgan Chase & Co. surpassed expectations and Bank of America Corp. didn't, they both point to some pretty good trends in the U.S. banking sector: Credit quality is improving, with lower loss provisions; and operating profits are strong.
What does this mean for Canadian banks when they report their results? Michael Goldberg, an analyst at Desjardins Securities, believes that the results from JPMorgan and Bank of America might be an unscientific sample of the U.S. sector, but they nonetheless point to two conclusions:
1. "We should see improved credit quality for their U.S. operations (benefiting Toronto-Dominion Bank, Bank of Montreal and Royal Bank of Canada)"; and
2. "Trading revenue should be up sequentially but down year-over-year (it is hard to say how this may affect banks individually)."
This week, investors recoiled from U.S. bank stocks after they reported their earnings: Bank of America shares fell 1.3 per cent on Friday afternoon, after it reported. JPMorgan shares fell three straight days after it reported its results on Wednesday. By contrast, Canadian bank stocks have been treading water throughout the week, without any big moves.