Here's How Much Hedge Funds And The Buy Side Expect Banks To Profit

 |  Includes: BAC, C, GS, JPM, WFC, XLF
by: Leigh Drogen

This week marks the kickoff of the first quarterly earnings season of 2014 and the banks are first to bat. JP Morgan (NYSE:JPM) absorbed a record breaking $13 billion fine last year, but if you looked at their stock price you would never have guessed. 2013 was an outstanding year for U.S. equities across the board and financials were no exception. Below is a chart of the KBW Bank Index which reflects how well the bank stocks performed. The index was up nearly 30% in 2013.

KBW Bank Index 2013 (BKX)image

JPMorgan Chase and Wells Fargo (NYSE:WFC) will be the first two big banks to get us underway on Tuesday. Below are charts showing their financial results over the past 2 years including information derived from data submitted to the Estimize platform by a set of Buy Side and Independent analyst contributors.

image1. JP Morgan Chase image

Last year JPM was hit with a record breaking $13b fine and took it in stride to end probes from regulators over its mortgage-bond sales. JP Morgan Chase has beaten the Wall Street and Estimize consensus in each quarter over the past year. In each of these quarters, the Estimize consensus from Buy-side and Independent contributing analysts has been more optimistic than the Wall Street consensus.

By tapping into a wider distribution of contributors including hedge-fund analysts, asset managers, students, and non professional investors, Estimize has built a data set that is up to 69.5% more accurate than Wall Street, but more importantly it does a better job of representing the market's actual expectations.

The Estimize consensus has been more accurate than Wall Street over the 4 previous quarters by forecasting JPM will beat the Street, and this quarter contributing analysts on Estimize are expecting that pattern to continue but by a smaller margin.

2. Wells Fargo image

Wells Fargo is the other large bank reporting on Tuesday. Wells Fargo has consistently outperformed the Wall Street consensus and Estimize contributing analysts are expecting them to do it again on Tuesday. Wall Street is expecting 98c EPS while the forecast from Estimize is 99c.

3. Bank of America (NYSE:BAC)image

Over the past 6 quarters Estimize has been more accurate than the Street in forecasting Bank of America's earnings 5 times and 4 times on revenue. This quarter BAC stock is up big and analysts are expecting the company to beat the Street again on Wednesday.

4. Goldman Sachs (NYSE:GS)image

Over the past 2 years the Estimize consensus has been more accurate than Wall Street on Goldman Sachs every time. Interestingly, this is the first quarter that contributing analysts are expecting GS to miss the Street profit consensus. The consensus from Estimize is $3.95 EPS while Wall Street is forecasting $4.18.

5. Citigroup (NYSE:C)image

Over the past 6 quarters, Estimize has been more accurate in forecasting Citigroup's EPS 4 times. This quarter the contributing analysts are expecting Citi to beat the Street by a wide margin, despite missing by a narrow one last quarter.

It seems that with the exception of Goldman Sachs, hedge funds, buy side and independent analysts are forecasting better than expected earnings reports from the banks this week.

Disclosure: No positions