Bank stocks fell last week, but bank earnings estimates barely budged

Anna Vocino, founder and managing director of Eat Happy Kitchen in Santa Ynez, Calif., said she experienced the Silicon Valley Bank collapse this way: On the morning of March 10, she logged into the system bank to set up bill payments. which were due on Monday. Then her husband told her that the media was reporting that the bank was in trouble. About 15-20 minutes later, just as another breaking news alert about the bank’s collapse hit her inbox, the online interface she was working in crashed.

The jamming has started. She and her husband, who had multiple business accounts with the bank, wrote to their CPA and creditors for more information or leniency. Funds for the company, which has two employees and sells bio-based sauces and spices, were within FDIC coverage limits, she said. But there were questions about what that protection even looked like.

“I was getting emails, automated emails, from Square and Shopify and Quickbooks – you name it,” she said. “Anyone I had ever sent an electronic transaction to would write to me saying your bank accounts were null and void. I was like: Yeah, I know.

The stress of the collapse of SVB – and the collapse of Signature Bank, and the failover and support of First Republic Bank FRC,
and Credit Suisse Group AG CSGN,
– rippled through the markets and shocked small businesses on Main Street.

But Wall Street analysts who try to predict quarterly corporate results — and whose estimates often drive stock market actions when those results are above or below them — have been more muted about profits for the financial sector as a whole. At least, until now.

Between March 8 and Wednesday, earnings per share forecasts for the financial sector and the companies that make up the S&P 500 SPX index,
overall, barely ticked lower, the FactSet data shows.

For the full year over this period, these earnings estimates for the financial sector fell 0.8%. For the S&P 500 as a whole, those estimates fell 0.09%.

Only three firms in FactSet’s financial sector overall – Charles Schwab Corp. SCHW,
KeyCorp key,
and Comerica Inc. CMA,
— saw their earnings-per-share estimates drop more than 1% over that period, according to FactSet.

“It appears that analysts are not making significant cuts to estimates for other companies in the industry at this time,” John Butters, senior earnings analyst at FactSet, said in an email on Wednesday.

Still, those estimates will likely decline over the weeks, and there’s plenty of room for trepidation elsewhere. Others noted that banks could still set aside more money to cover deteriorating loans as inflation and worries about cracks in the banking sector threaten to create a greater shortage of cash for banks. buyers and businesses.

“They will likely increase their loan loss reserves, which will weigh on first-quarter earnings,” said Ed Yardeni, president and chief investment strategist at Yardeni Research. “They will likely issue a warning to analysts in the coming weeks before earnings season begins.”

Elsewhere, analysts said smaller banks could bear more of the financial fallout from one of their larger and struggling peers. UBS analysts noted on Thursday that almost half of the country’s loans came from outside the country’s 25 largest banks. And they said “it’s in this small group where deposit growth and costs could be a bigger challenge.”

Goldman Sachs Research said in a blog post Thursday that at smaller U.S. banks, “tightening lending standards among these institutions is expected to reduce economic growth this year.” A recent new study also found that nearly 190 U.S. banks remain prone to similar issues that sank SVB.

Vocino said she implemented a discount on items a day after SVB failed to bring in cash, as access to her cash in the bank remained in flux. Her customers, she said, stepped up and several products on the Eat Happy Kitchen website, as of Friday, were sold out.

Vocino, who is also a voice-over artist, said SVB’s move to its new banks was due to take place on Friday or Monday. Successfully withdrawing money from one bank – and waiting for the funds to land in another – can take a few days, and therefore carries its own suspense.

“Nobody wants to switch banks,” she said. “It’s such a pain in the a–. Nobody wants to do that.

And amid the flood of positions on what SVB’s collapse means for the tech world and the years of low interest rates that fueled its rise, she said there were other aspects of the bank’s downfall that were worth focusing on.

“I was watching CNBC,” she said. “And all the focus is on the tech brothers and the Silicon Valley crash. And I say to myself: hello? There are all these other companies with this company.

This week in earnings

Apart from the tremors in the country’s banks, the calmer stretch of the earnings season will continue into the week ahead. According to FactSet, only five S&P 500 companies, including one member of the Dow 30, will release quarterly results in the coming week.

Among them: results from VR manufacturer Winnebago Industries Inc. WGO,
will follow those of its rival Thor Industries Inc. THO,
as well as a slowdown in RV demand as rising interest rates and prices reduced enthusiasm for road trips when the pandemic crippled the economy. Petco Health & Wellness Co. Inc. WOOF,
and Chewy Inc. BLOW,
are also reporting during the week, as rising prices test customers’ ability to spoil their pets.

Elsewhere, results from General Mills Inc. GIS,
could offer more clarity on the direction of stubbornly high food prices. Express Inc. EXPR Chain Stores,
and Ollie’s Bargain Outlet Holdings Inc. OLLI,
also report, as analysts try to gauge how much further retailers need to cut prices to attract shoppers who are increasingly worried about the economy.

Calls to put on your agenda

Nike and Foot Locker: Foot Locker Inc. and Nike Inc., which have both tried in recent years to rely less on each other for sales, report their results on Monday and Tuesday, respectively. But they will do so following a drop in demand for shoes and clothes, after more customers opted to save the money they had to pay for necessities, such as food and gasoline. Nike NKE,
in December, announced better than expected results. But Foot Locker FL,
has downsized, liquidated a sports fashion brand in Europe and undergone a wider executive reshuffle over the years.

Numbers to watch

GameStop Earnings: Video game chain GameStop Corp., the original meme stock, reports results on Tuesday. While big stock moves can come and go depending on the mood of meme traders, Wedbush analyst Michael Pachter, in a note on Thursday, raised bigger concerns about the company.

“Near-term headwinds include potential holiday season disappointment, hardware challenges at Microsoft and Nintendo, the impact of layoffs, and a disappointing start to the non-fungible token market,” he said. “Long-term headwinds include potential liquidity issues and shifting player preferences, with an increased appetite for cloud, digital, mobile and subscription. We expect significant cash burn until ‘in fiscal year 23 at least, eventually forcing the company to issue more shares.


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