Bank earnings are down - how to profit



Last week, the Dow Jones (DJI) had its best week in 82 years. Unfortunately for the bulls, the Dow is going down this week as the banking industry continues to report losses in earnings. Bank stocks are dropping and there is an opportunity for financial movers to profit off bad earnings.


Profits decline - share prices decline



So far, JPMorgan Chase & Co. (JPM), Wells Fargo (WFCD), Morgan Stanley (MS), and Charles Schwab (SCHW) have all reported their quarterly earnings this week. Because of the coronavirus breakout, its not surprising that all four major banks reported a loss in earnings. In fact, they all missed quarterly projections too. After missing quarterlies and announcing loss in profits, their share prices have declined. These banks are setting a precedent for the entire bank industry, so it's important to see what happens with other banks.


What bank to watch tomorrow


Tomorrow, Regions Financial (RF) is set to report their first quarter earnings before opening bell. The Zacks Consensus Estimate is for the bank to post quarterly earnings of $0.31 per share, which represents a year-over-year change of -16.2%.


Last month, the Fed slashed interest rates to help protect the economy from the COVID-19 breakout. While great for people looking to re-finance, it's not so great for the banks. Interest rates at zero means that the bank isn't making from interest. This is likely going to hurt the bank's revenue statements and EPS.


Regions stock is slipping


Regions Finance Daily Chart. Source: TradingView


Since JPMorgan announced their negative Q1 report on Tuesday, Regions Financial stock has fallen (-17.8%). Big banks are reporting negative quarterlies everyday this week, which is resulting in negative sentiment from investors. It appears the negative sentiment is being reflected in Regions stock price as it continues to fall.


Prediction of Regions stock price after reporting their Q1


Regions stock has been losing value all week because of negative sentiment in the banking industry. Investors are expecting the company to miss their Q1 expectations and if they do, share prices have a good chance of decreasing even further. Other banks have had a loss of 2-10% in share prices after reporting their Q1. We're expecting Regions to have a loss of at least 3.50% if they can't beat Q1 expectations.


At financial movers, we're shorting Regions stock. Based on Q1 results from other major banks this week, we believe there is a low probability that Regions will beat expectations.


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DISCLAIMER: This article does not contain financial advice. Any and all market analysis is solely the authors opinion. Investors should do their own research before making any investment.