- The first quarter of 2014 was disappointing for BAC and JPM in several regards, notably an outpouring of bad publicity, surrounding civil and criminal investigations, as well as certain aspects.
- JPM kicks off Q1 earnings for several megabanks on April 11, 2014.
- BAC and JPM shareholders should consider poor results as times to take some profits in either or both of these mega institutions.
The first quarter of 2014 was very disappointing for U.S megabanks like Bank of America (NYSE:BAC) and JPMorgan Chase (NYSE:JPM) and the result has been that their stocks prices have been falling over the past month. BAC is now down over 7% and JPM is now down over 3% over the past thirty days.
BAC Struggles to Maintain Investor Confidence
With the mortgage lending business in retreat and trading revenues down, Bank of America is facing an uphill battle to maintain the confidence of the public and its shareholders.
During the height of last decade's banking crisis, plenty of commentators made predictions of sudden, irreversible doom for Bank of America. Needless to say, none of these luridly imagined financial apocalypses ever occurred, yet BAC, along with JPM, continues to appear stuck in a cycle of bad behavior, bad publicity and criminal investigations.
The largest financial institutions may have the clout and connections to forestall going out of business altogether; however, even the largest of these institutions is vulnerable to shrinkage and loss of credibility.
JPM Kicks Off Q1 Megabank Results
On April 11, 2014, JPMorgan Chase will release its first-quarter earnings report, setting the stage for a slew of updates from other giants of finance. Since February, analysts have resolutely lowered their earnings and profit estimates for this and several other U.S. banks.
Some analysts expect disappointing figures from Bank Of America, Citigroup (NYSE:C) and Goldman Sachs (NYSE:GS), among others. Five of the six largest U.S finance firms may post smaller first-quarter earnings this year in comparison with 2013's first quarter.
2013 v. 2014
In an atmosphere of growing optimism, 2013 saw a partial rally for bank stocks. This year, fewer people are willing to put their trust in controversial megabanks.
It is hard to say how much financial impact banks experienced thus far in 2014 from their numerous criminal and civil investigations. However, Bank of America recently settled for $3.7 billion and $800 million in consecutive legal battles-a staggering figure to begin with.
At the very least, it is generally safe to assume that periods of bad publicity can undermine public faith in any industry.
Of course, it isn't fair to hold the entire banking sector responsible for individual controversies. Banks like Wells Fargo (NYSE:WFC) and Morgan Stanley (NYSE:MS) stand apart by committing to better fiscal responsibility. However, most of the major U.S financial firms have revealed increasingly reckless tendencies over the past several years and the various regulators have taken notice.
What Investors Should Watch For This Month
Investors in BAC and JPM should particularly watch the Q1 earnings release for these firms and consider poor results as further support that these institutions must make core improvements if they are going to improve their financial performance so that they can pay their shareholders better dividends.
Investors might also consider taking some profits in BAC and JPM now in the event poor earnings results in short- or long-term declines in stock price.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.