U.S. regional banks have stepped up to the earnings plate with first-quarter results that beat expectations, providing some justification for the sector's strong rally in recent months.
These smaller financial players have been embraced by investors, following a trifecta of stronger economic growth, rising interest rates (which can make loans more profitable for banks) and the possibility of relaxed financial regulations.
The S&P index of regional banks has risen nearly 70 per cent since last summer – good news for investors, but the strong gains have certainly turned up the pressure on bank performance.
Three banks that reported their results after markets closed on Thursday met this pressure head-on.
Associated Banc-Corp, which is based in Wisconsin, reported a profit of 35 cents (U.S.) a share, beating a consensus expectation of less than 32 cents a share.
FCB Financial Holdings Inc., which operates community banks in Florida, did even better: It reported a profit of 86 cents a share, which was considerably better than an expectation of 62.8 cents a share.
And National Bank Holdings, which has branches in Colorado, Missouri, Kansas and Texas, reported a profit of 30 cents a share, better than the 23 cents expected by analysts.
The regional bank reports will continue into Friday as well, when SunTrust Banks Inc., which has subsidiaries in Florida, Georgia, Maryland and several other states, reports its results.
If you prefer bigger players, Visa Inc. also reported its results after markets closed on Thursday. The credit card and payments giant reported a profit of about 86 cents a share, easily surpassing expectations for a profit of 79 cents a share, according to Bloomberg.
Toy-maker Mattel Inc. reported an adjusted loss of 32 cents a share. That was far worse than the 17.5-cent loss that analysts had been expecting. Management blamed the setback on a "retail inventory overhang" over the holiday period that it said had now cleared.
On Friday, General Electric Co. will be the stock to watch when the industrial giant releases its first quarter results. Analysts are expecting GE will show a profit of nearly 17 cents a share, down from 21 cents a share last year. No wonder the share price has been drifting sideways, trading between $28 and $32 this year.
The company tends to beat expectations by an average of 4 per cent. Last quarter, after merely matching expectations, the share price fell 2.2 per cent.