With Banks, Analysts Still Missing the Mark

One bank after another has been reporting "surprise" earnings over the past week or so, but given the refinancing boom and a months-long trend in interest rates, it shouldn't have been such a huge shock.

The surprise is that analysts continue to earn paychecks and retain clients after being so far off the mark, whether in expecting huge writedowns and losses last year, or the ensuing turnaround.

The Big Miss of 2009 began a week ago when Wells Fargo (WFC) preannounced a $3 billion first-quarter profit on Friday. The results translated into 55 cents a share, more than double the average analyst estimate of 23 cents a share, according to Thomson Reuters.

Goldman Sachs (GS) followed up with its own surprises: $1.7 billion in quarterly earnings and a $5 billion capital raise. Its profit was also more than twice what the average analyst expected, at $3.39 a share.

The story was more of the same this week with JPMorgan Chase (JPM), General Electric (GE), whose finance arm has stirred great anxiety and apparently brought forecasts far too low, and Citigroup (C).

JPMorgan topped expectations by 8 cents a share, GE beat by 5 cents, and Citi's loss was only about half as bad as expected, 18 cents a share vs. a 34-cent estimate.

The trend wasn't particular to the big kahunas, either. Regions Financial (RF) and BB&T (BBT) both blew forecasts away, as well.

Following Wells' preannouncement, Sandler O'Neill analysts said they "would be curious to know exactly how the [net interest margin] was able to come in so far ahead of our expectations."