Wells Fargo results may be the highlight of what is shaping up to be a tough earnings season for the country's biggest banks. Bobbi Rebell reports.
Investors in banks may soon be asking- where's the money? Earnings season could be a tough one- Wells Fargo stock fell Friday after it reported a 39 percent drop in mortgage revenue. And Gerber Kawasaki CEO Ross Gerber- says that was the best of the bunch: SOUNDBITE: ROSS GERBER, CEO, GERBER KAWASAKI (ENGLISH) SAYING: "I think the trends we are going to see are charges against earnings for settlements, and legal issues. I think we are going to see continued, I would say complaining, from banks over the restrictions put in place from various laws, Dodd Frank, are starting to really affect their performance. So, I think we are going to see a fairly lackluster earnings season. Also because rates continue to stay low hurting those margins and pressuring them." On the calendar: Monday- Citigroup Tuesday- Goldman Sachs; JP Morgan Wednesday- Bank of America And Thursday - Morgan Stanley The big challenge for these guys- making money in businesses that just aren't as lucrative as they used to be - like trading and investment banking. Add to that, increasing regulation and litigation that, despite reassurances to the contrary, they just can't seem to wrap up. Morningstar's Jim Sinegal: SOUNDBITE: JIM SINEGAL, EQUITY ANALYST, MORNINGSTAR (ENGLISH) SAYING: "Fines are getting bigger and bigger, and I think part of the issue is that investment banks have not been public entities for a long time. I think there is a big question as to whether those incentive structures have encouraged wrong doing and whether that is going to continue to escalate. In fact, I think there is a lot that regulators, a lot that prosecutors, a lot that litigants, can go after the big banks for. I don't think we are at the end as far as that goes." And that is just one reason he's concerned about Citigroup: SOUNDBITE: JIM SINEGAL, EQUITY ANALYST, MORNINGSTAR (ENGLISH) SAYING: "I think J.P. Morgan and Bank of America are actually better positioned. They are a little more focused than Citigroup. I think Citigroup, over the long term its international exposure is a good thing, but kind of, as the U.S. economy has recovered, you have seen its effects on Wells in a good way. I think the U.S. is doing a lot better than some parts of the world and you might see that come through in B of A and J.P. Morgan's results compared to Citigroup." But the good news is probably coming further out- things will likely improve, according to Keefe Bruyette and Wood's Fred Cannon: SOUNDBITE; FRED CANNON, DIRECTOR OF RESEARCH, KEEFE AND WOODS (ENGLISH) SAYING: "The financials generally, and banks specifically, the one area of the economy when rates rise it tends to be a good thing, because for most banks loan rates tend to increase before deposit rates increase. That widens the spread on the loans and especially for those banks who have been growing loans rapidly this could set up for very good earnings positive surprises in 2015 and beyond." So while the banks are still not out of the woods- the road ahead will likely be a little less rocky.