BlackRock Beats Expectations in Quarterly Earnings But Big Banks Not Expected to Follow

3:06 PM, Oct 11, 2017 — BlackRock (BLK) reported better-than-expected results on Wednesday, but the positive trend may not be followed as the pace of earnings reports from top US financial firms picks up later this week.

The investment manager said third quarter adjusted net income, which excludes one-off items, rose to $5.92 per share in the quarter from $5.14 a year earlier. Analysts in a Capital IQ poll were expecting earnings of $5.57. Revenue of $3.23 billion also beat the Street’s forecasts, propelled by growth in base fees, performance fees and technology and risk management revenue.

“BlackRock benefits from strong financial markets while banks are leveraged to loans and rising interest rates which benefit those loan spreads,” said Tim Ghriskey, chief investment officer at Solaris Asset Management, a hedge fund. “BlackRock has a very diversified portfolio while banks have several segments.”

Citigroup (C) and JPMorgan Chase (JPM) are slated to report Thursday followed by Bank of America (BAC) and Wells Fargo (WFC) on Friday.

In a note dated Oct. 6, Goldman Sachs said a slowdown in earnings per share growth is expected to be “particularly pronounced in financials.” The sector is expected to see EPS fall by 3% in the third quarter, compared with a 21% increase in the first quarter and a 10% rise in the second quarter, Goldman said.

Zacks Research said the Federal Reserve interest rate hike in June had a full-quarter impact during the third quarter, which would have eased pressure on operating margins, and that loans continued to increase, which will help interest income.

But offsetting that is a seasonally weak period in capital markets with a slowdown in stock issues, weaker trading volumes and reduced merger acquisition activity which hurts fee income growth. And with the banks already cutting costs where they could in prior quarters, there will be less support from reduced expenses, according to Zacks.

Companies: Citigroup Inc.
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