Fly Intel: What to watch in first round of big bank earnings reports

JPMorgan (JPM) and Citigroup (C) are scheduled to announce quarterly results before the open on October 13, while Wells Fargo (WFC) is expected to report on October 14. What to watch for: 1. OUTLOOK: During the company's last earnings call, JPMorgan said it still sees fiscal year 2020 net interest income of about $55.5B, market dependent. The bank also said it expects fiscal year 2020 adjusted expense of about $65B. Meanwhile, Wells Fargo said during its last earnings call that it sees fiscal year 2020 net interest income in the $41B-$42B range and deposit costs continuing to decline in the second half of the year. The company also announced that it expects to reduce its third quarter 2020 common stock dividend to 10c per share from 51c per share. 2. CITI'S CONSENT ORDER: Last week, the Office of the Comptroller of the Currency, or OCC, assessed a $400M civil money penalty against Citibank related to deficiencies in enterprise-wide risk management, compliance risk management, data governance, and internal controls. The OCC said it took these actions based on the bank's unsafe or unsound banking practices for its long-standing failure to establish effective risk management and data governance programs and internal controls. The agency also issued a cease and desist order requiring the bank to take broad and comprehensive corrective actions to improve risk management, data governance, and internal controls. Following the news, JPMorgan analyst Vivek Juneja downgraded Citi to Neutral from Overweight with an unchanged price target of $57.50. The analyst noted that the OCC order specifically stated that Citi will need approval for any significant acquisition of even a portfolio or business. There were "some surprising and very disappointing comments" in the orders given that Citi has been working since the last financial crisis on improving risk management, controls, and oversight at the parent and bank level, the analyst added. Juneja said Citi has a "credibility gap" versus peers due to its "much weaker" profitability, and that these orders will add to the pressures. 3. JPMORGAN PROBE: On September 29, JPMorgan Chase announced that the company has entered into agreements with the U.S. Department of Justice, the U.S. Commodity Futures Trading Commission and the U.S. Securities & Exchange Commission to resolve investigations into historical trading practices by former employees in the precious metals and U.S. treasuries markets, and related conduct between 2008 and 2016. In connection with the agreements, the bank will pay a total of approximately $920M and has entered into a deferred prosecution agreement with the DOJ. 4. JOB CUTS: Wells Fargo has cut 700 jobs as part of workforce reductions that could ultimately impact "tens of thousands" of staff, Bloomberg's Hannah Levitt reported last week, citing people with knowledge of the matter. The terminations affected positions across the commercial banking division, according to the report. 5. LIMITS ON BANK DIVIDENDS, BUYBACKS: Due to the continued economic uncertainty from the coronavirus response, the Federal Reserve Board has announced it will extend for an additional quarter several measures to ensure that large banks maintain a high level of capital resilience. For the fourth quarter of this year, large banks-those with more than $100B in total assets-will be prohibited from making share repurchases. Additionally, dividend payments will be capped and tied to a formula based on recent income. Other publicly traded big banks include Bank of America (BAC), Goldman Sachs (GS), Morgan Stanley (MS), and U.S. Bancorp (USB).