Second Quarter Earnings: Sound Performance

August 19, 2016 at 1:31 PM

Earnings releases for the second quarter among publicly-traded banks with more than $1 billion in total assets showed an improvement in industry profitability despite a decline in the net interest margin. The median stock price increased 2.47% from that of the first quarter, bouncing back from the previous quarter 4.14% decline. The median price to earnings multiple was also higher, up 27 basis points over the first quarter to 15.11x. Impressively, this positive stock performance was accomplished despite global volatility following the June 23rd “Brexit,” which dampened expectations of interest rate increases this year, and general uncertainty regarding the global economic outlook.

This improved investor sentiment was driven by improved industry fundamentals. Second quarter showed a slight increase of 4 basis points on the median return on average assets, to 0.96%, as well as a 28 basis point increase on the median return on average equity, to 8.62%. Growth in net loans increased significantly from the first quarter and asset quality also improved. Consequently, revenue increased slightly. Expenses declined as a percentage of average assets by 4 basis points from the first quarter. One down note was that the median net interest margin decreased 5 basis points to 3.42% for the second quarter.

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Source: SNL Financial 2016. All data are public and as of July 30th, 2016.1.  Stock Price Change is the change in the closing stock price of the last trading day of the previous quarter to the closing stock price of the last trading day of the current quarter.2.  Price/Earnings per Share (fully diluted) is defined as the closing price as of the last trading day of the current quarter divided by earnings per share, fully diluted over the trailing four quarters.3.  Price/Tangible Book Value per Share is defined as the closing price of the last trading day of the current quarter divided by the tangible book value per share on the last day of the quarter.4. Net Loan Growth is defined as the change in Total Net Loans from the trailing quarter.
5. Average Assets is defined as the average of the Total Assets reported over the trailing four quarters.

 

Lauren Rosenberg

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