Key Takeaways:

  • Recent uptick in rates might spell better times ahead for banks
  • Credit loss provisions still expected to weigh, but cost-cutting has likely helped
  • Housing market seen aiding Wells, while Citigroup’s
    C
    credit card business stays in focus

A lethal combination of ultra-low interest rates, credit worries, a steep economic slowdown, and tough government regulations ganged up on big banks this year. Despite that, expectations for the group’s Q3 earnings performance are on the rise.

Granted, the numbers don’t look like something to throw a party over, with research firm FactSet predicting cumulative Financial earnings to fall 19.4% from a year ago. The good news is that those expectations look a lot sunnier than where analysts were back in June, when they predicted a Financials Q3 earnings cratering of 34.4%.

Why the improvement? For one thing, many banks benefit from the energetic capital markets and the trading revenue they provide. Second, low rates have their good side, encouraging more loan activity.

Some of the big banks leading the upward earnings expectations meter include JP Morgan Chase
JPM
(JPM) and Wells Fargo
WFC
(WFC), FactSet reported. It appears likely they both could have relatively positive Q3 results despite all the headwinds they’ve faced and continue to face in this rough 2020.

The same goes for Citigroup (C), which, like JPM, is expected to report Q3 earnings early tomorrow. Those will be followed Wednesday morning by WFC.

Before zeroing in on individual banks, let’s scroll back for a broader view. Big banks haven’t performed well in the market this year, but they’ve generally done a great job setting aside money for possible credit losses and cutting costs. This could position most of them pretty nicely for any economic rebound once the pandemic passes.

That said, the credit

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Alaska’s Department of Revenue materially increased investments in Gilead Sciences and Eli Lilly stock in the third quarter.


David Paul Morris/Bloomberg

Alaska’s Department of Revenue made big changes in some of its biggest holdings in U.S.-traded equities.

The state agency, which is charged with collecting and investing funds for public purposes, materially increased investments in

Gilead Sciences

(ticker: GILD) and

Eli Lilly

(LLY), two companies working on treatments for Covid-19, in the third quarter. The Department of Revenue also bought more

Wells Fargo

(WFC) stock and cut holdings in

Bank of America

(BAC). The Alaskan agency disclosed the trades, among others, in a form it filed with the Securities and Exchange Commission.

Alaska’s Department of Revenue, which managed $8.1 billion in U.S.-traded equities as of Sept. 30, didn’t respond to a request for comment on its stock transactions.

The agency bought 253,419 more Gilead shares in the third quarter, raising its investment to 749,107 shares of the biotech.

Gilead stock slid about 18% in the third quarter, and the shares are now down about 2% for the year to date through Friday’s close. By comparison, the

S&P 500 index,

a broad measure of the market, is up 7.6% this year.

Gilead announced in September that it had agreed to acquire

Immunomedics

(IMMU), which has a promising new treatment for cancer, Trodelvy. Gilead’s earlier deals for companies developing cancer treatments haven’t paid off yet. Gilead has come into focus in recent days as President Donald Trump was treated with its antiviral drug remdesivir, to help speed his recovery from the coronavirus.

The department of revenue bought 130,879 additional Lilly shares, raising its investment in the drug giant to 326,523 shares as of the end of September.

Lilly stock slid about 10% in the third quarter, but remains up about

Wells Fargo  (WFC) – Get Report reportedly has cut more than 700 commercial-banking jobs and the bank ultimately could reduce tens of thousands positions.

Shares of the San Francisco-based financial services company were up 2.56% to $24.80 in trading Wednesday.

The terminations affected positions across the division, Bloomberg reported, citing people with knowledge of the situation.

The unit offers a variety of services to businesses that typically have more than $5 million in annual sales. 

Wells Fargo didn’t immediately respond to a request for comment, but company spokeswoman Katie Ellis confirmed to Bloomberg that at least some reductions have occurred.

“We are at the beginning of a multiyear effort to build a stronger, more efficient company for our customers, employees, communities and shareholders,” Ellis said in a statement. “As part of this work, we will have impacts, including job reductions, in nearly all of our functions and business lines, including commercial banking, where we have started displacements.”

Ellis added that Wells Fargo expects “to reduce the size of our workforce through a combination of attrition, the elimination of open roles and job displacements.”

Wells Fargo, the U.S. banking industry’s largest employer, became the first major lender in the nation to resume job cuts this year after a number of top firms said they would try to offer workers stability during the Covid-19 pandemic.

Wells Fargo is under pressure to spend less after slashing its dividend and suffering its worst quarter in more than a decade in July.

More than 30 banks around the world are behind planned staff reductions totaling about 68,000, according to figures compiled by Bloomberg.

Much of that’s being driven by HSBC Holdings  (HSBC) – Get Report, which said in February it would reduce its workforce by 35,000 as part of a

(Reuters) – Wells Fargo & Co <WFC.N> has started to cut jobs at its commercial banking unit as part of larger reductions that will impact nearly all of its functions and business lines, a company spokeswoman said on Wednesday.

The bank resumed job cuts in early August after it paused layoffs in March because of the COVID-19 pandemic.

Wells Fargo said in July it would launch a broad cost-cutting initiative this year as the bank braces for massive loan losses caused by the pandemic and continues to work through expensive regulatory and operational problems tied to a long-running sales scandal.

“We are at the beginning of a multiyear effort to build a stronger, more efficient company for our customers, employees, communities, and shareholders,” a spokeswoman said via email on Wednesday.

“The work will consist of a broad range of actions, including workforce reductions, to bring our expenses more in line with our peers,” she added, without specifying the number of job cuts.

Wells Fargo has cut 700 jobs as part of workforce reductions that could ultimately impact “tens of thousands” of staff, Bloomberg News reported on Wednesday citing people with knowledge of the matter.

At the height of the COVID-19 pandemic last spring, the heads of large U.S. banks including Morgan Stanley <MS.N>, Bank of America Corp <BAC.N> and others had pledged not to cut any jobs in 2020.

However, as executives prepare for an extended recession and loan losses that come with it, layoffs are back on the table.

Goldman Sachs Group Inc <GS.N> said last month it plans to move forward with “a modest number of layoffs”.

(Reporting by Noor Zainab Hussain in Bengaluru; Editing by Shailesh Kuber)

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Oct 7 (Reuters)Wells Fargo & Co WFC.N has cut 700 commercial banking jobs as part of workforce reductions that could ultimately impact “tens of thousands” of staff, Bloomberg News reported on Wednesday citing people with knowledge of the matter.

The bank resumed job cuts in early August after it paused layoffs in March because of the COVID-19 pandemic.

Wells Fargo said in July it would launch a broad cost-cutting initiative this year as the bank braces for massive loan losses caused by the pandemic and continues to work through expensive regulatory and operational problems tied to a long-running sales scandal.

Layoffs, branch closures and cuts to third-party spending are on the table, the bank’s executives had then said.

Big U.S. banks had postponed decisions about staff cuts when the virus outbreak first began to take hold, with executives saying they were unsure how long the outbreak would hurt the economy and worried about being unprepared if business suddenly snapped back.

Goldman Sachs Group Inc GS.N said last month it plans to move forward with “a modest number of layoffs”.

Wells Fargo did not immediately respond to Reuters request for comment.

(Reporting by Noor Zainab Hussain in Bengaluru; Editing by Shailesh Kuber)

((noor.hussain@thomsonreuters.com; Within U.S. +1 646 223 8780; Outside U.S. +91 80 6182 2663 or +91 80 3796 2663 ;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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