The S&P had a decent showing in the first half of the year improving by 6%, but its performance could have been better, had the financial segment performed better. Big financial companies led by the likes of Morgan Stanley (NYSE:MS), JPMorgan Chase & Co. (NYSE:JPM) and Wells Fargo & Co (NYSE:WFC) faced mounting challenges and litigation crisis in the first half of the year.
Banks earnings are expected to improve in the second half of the year at the back of the improving U.S economy. The economy continues to achieve improvements in the right direction seen by more jobs creation especially in the private sector, as well as a drop in unemployment levels to 6.1%. Kayla Tausche on CNBC remains bullish on loan demand, considering that it will increase in the second half of the year.
“Consumer banks will see loan demand keep picking up,” said Tausche.
Tausche says that bond trading looks set to continue being weak, and the FED may stop paying banks interests or opt to start charging them on the $2.6 trillion in excess reserves they hold. Legal issues continue to be the biggest enigma biting on earnings of the likes of JPMorgan Chase & Co. (NYSE:JPM), Morgan Stanley (NYSE:MS) and Wells Fargo & Co (NYSE:WFC) at the back of court rulings on illegal trade practices
JPMorgan Chase & Co. (NYSE:JPM) Chairman and CEO, Jamie Dimon, remains optimistic on the growing economy that should enable the company post better earnings in the second half of the year. The CEO has already indicated that JPM will be dedicating extraordinary effort towards a new financial architecture as well as making progress on control data, after suffering 8% drop in revenue in the first quarter. Minimal litigation cases will be key if JPMorgan Chase & Co. (NYSE:JPM) is to make an improvement on its $5.3 billion in earnings reported in the first quarter.
Wells Fargo & Co (NYSE:WFC) just Like JPMorgan Chase & Co. (NYSE:JPM) has already incurred fines in millions of dollars on allegations of illegal practices in the Mortgage sector. The bank has already resorted to carrying rounds of layoffs as it looks to relieve itself of unnecessary costs from non-core business operations.
The second half looks set to be defining for Wells Fargo & Co (NYSE:WFC) as it looks to build on its 4.5% improvement on net income in the first quarter. The company will also need to work on its revenue that slumped by 3% in the first quarter.
Morgan Stanley (NYSE:MS), on the other hand, is not doing badly in the market at the back of generating higher year-over-year revenues in all its three business segments. Going forward the company has promised to return maximum value to its shareholders by initiating a $1 billion share repurchase.