Banks Stumble Again: Financial Losers
The broad indexes all ended lower after the Federal Reserve reported that consumer credit in the United States expanded by $18.4 billion during November, exceeding the average estimate among economists of a $12.75 billion increase, according to Briefing.com.
Shares of Bank of America (BAC) declined 1% to close at $11.98, one day after the company announced a series of one-time mortgage-related items that would leave it with only " modestly positive " fourth-quarter earnings. The company will announce its fourth-quarter results on Jan. 17.
In addition to its $10.3 billion in payments to Fannie Mae (FNMA) and its large contribution to the $8.5 billion mortgage foreclosure settlement between the nation's biggest mortgage loan servicers and federal regulators, Bank of America also announced that it would sell servicing rights on 2 million residential mortgage loans, with unpaid balances totaling $306 billion.
On Tuesday, Reuters reported that the company was looking to sell servicing rights on another $100 billion in mortgage loans, citing unnamed sources.
KBW Bank Index (I:BKX) was down 1% to close at 53.26 ,with all but six of the 24 index components showing declines for the session.
Northern Trust's shares trade for 1.8 times tangible book value, according to Thomson Reuters Bank Insight, and for 15.8 times the consensus 2013 earnings estimate of $3.31 a share, among analysts polled by Thomson Reuters. The consensus 2013 EPS estimate is $3.71.
The shares returned 30% during 2012, following a 27% decline during 2011.
Based on a quarterly payout of 30 cents, the shares have a dividend yield of 2.30%.
Northern Trust will announce its fourth-quarter results, with analysts expecting a profit of 75 cents a share, increasing from 73 cents in the third quarter, and 67 cents in the fourth quarter of 2011.
In his firm's fourth-quarter preview for trust banks, JPMorgan analyst Vivek Juneja on Tuesday said that "similar to its peers, NTRS continues to face revenue pressures from low absolute interest rates and declining revenues in volatility driven businesses, but should benefit from strong long term secular growth opportunities, expense savings initiative, and industry consolidation."
JPMorgan has a neutral rating on Northern Trust, with a price target of $50.50, estimating that the company will report fourth-quarter earnings of 76 cents, with a 2013 EPS estimate of $3.34 and a 2014 EPS estimate of $3.75.
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