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Goldman And BofA Earnings: A Tale Of Two Banks (And Digital Strategies)

The earnings theme for Tuesday (Jan. 19), at least in financial services, might be termed: A tale of two banks.

Bank of America and Goldman Sachs are slated to post fourth-quarter results that day, and we’re likely to see some of the same observations and actions that have marked other financial institutions’ earnings. That would include releasing reserves that had been taken to cover anticipated loan losses. Lofty revenues gleaned from Wall Street trading. Questions over credit quality. Digital initiatives too, of course.

Yet every company has its own tale to tell. For Bank of America, we’re likely to see some discussion on macro trends, on consumer and commercial spending, on cards and branch count.

For Goldman, of course, the push downstream, toward retail, consumer banking continues apace.

As noted by Nasdaq.com, the consensus estimate for the consumer banking segment is about $1.4 billion, and the Street anticipates roughly $10 billion in consolidate top line, with average earnings of $7.47, per Yahoo Finance.

The pandemic, Reuters reports, may have proved to be headwinds for loan and deposit activity at the consumer segment. In tandem with that slowdown, the investment banking giant may be considering acquisitions to bolster those results. Acquisitions may come in the digital banking space, and not on augmenting any physical footprint (such as through branches).

Marcus will remain in focus, and the banking app will be in the spotlight — particularly as it has been helping drive deposits. The company said last quarter that consumer deposits (which would include Marcus) — stood at $96 billion, up $4 billion from the previous quarter. The company has been targeting $125 billion in consumer deposit balances over five years. Consumer loan balances were $7 billion, of which $4 billion stemmed from Marcus, and the remaining $3 billion from Apple Card. Look for more color on the Apple partnership, as well.

Bank Of America’s Take

The Zacks Consensus Estimate for BofA’s fourth-quarter earnings stands at 56 cents. The consensus estimate for sales of $20.4 billion implies a 8.7 percent decline year over year, taking its place alongside other financial institutions that have seen high single-digit declines in the top line.

Back in October, in discussing third-quarter results, the bank said consumer spending actually grew year over year.

“Year to date, across $2.3 trillion in spending at Bank of America, customers have spent more than they did last year,” CEO Brian Moynihan told investors and analysts on a conference call following the October release. “What we are seeing as we turn into October is that spending by our consumers is still solid and about 10 percent ahead of last year.”

It remains to be seen what clarity the bank has on current spending trends and what may be done with stimulus payments (i.e., whether they’re being spent or saved or used to pay down debt). Non-performing loans were flat in the latest quarter, and similar to what has been seen with other banks, we may get some color about loan forbearance programs. With a bit more granularity, card spending is rebounding.

And in a trend that is likely to see continued traction in this new year — and beyond — active mobile banking customers were up 6.6 percent in the period to 30.6 million.

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