Big Banks Prepare to Release Earnings as Brexit and Low Interest Rates Weigh

Interest rates did not rise as expected due to the Brexit resulting in low net income for big U.S. banks.
By Krishna Thakker ,

NEW YORK (TheStreet) -- U.S. bank analysts have estimated low net income for this year, as interest rates did not rise as they had hoped, Bloomberg News' finance reporter Laura Keller said on "Bloomberg Go" Monday morning.

Days after Britian voted to leave the European Union, banks reported a huge uptake in FX exchange that brought in more revenue from the commissions earned, Keller said.

Some banks, such as JP Morgan (JPM) - Get Report , have said this was one of the best periods in FX trading it has had, she added.

"The question is whether that week was enough to overwhelm the rest of the quarter, which wasn't all that great. It was better but there is a lot of choppy trading going into Brexit as well," Keller reported.

The Brexit indirectly hurt banks since interest rates did not rise as analysts had hoped. 

Interest rates are not as low as they have been in the past, but did not rise enough to overcome the damage done to banks in the first quarter and it won't prove to hurt them much either, she explained.

The Brexit will also have an effect on interest rate rises in the upcoming third and fourth quarters.

JP Morgan, Goldman Sachs (GS), Citigroup (C), and Wells Fargo (WFC) should come out of the Brexit better than Bank of America (BAC)and Morgan Stanley (MS), Keller said.

Goldman Sachs is the only one of the big six banks that is rising because the bank's last quarter was disappointing from unexpected legal costs, Keller added.

JP Morgan is expected to report second quarter earnings on Thursday, while Citigroup and Wells Fargo will report on Friday. Goldman Sachs, Bank of America, and Morgan Stanley are expected to report earnings throughout the following week.

Separately, TheStreet Ratings team set this stock at a "buy" with a ratings score of A-. The company's strengths can be seen in multiple areas, such as its expanding profit margins and attractive valuation levels. TheStreet ratings team feels its strengths outweigh the fact that the company shows weak operating cash flow.

TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

You can view the full analysis from the report here: JPM

Loading ...