Earnings kick off this week with Financials posting an early first round of results. In a lower interest rate environment, we’re conscious that some banks may be feeling the squeeze on net interest margins. To baseline analyst and investor expectations, we used Amenity’s NLP tools to examine margin-related commentary from the last round of earnings calls for each of the Financials reporting this week.

By
Derek William Valles, PhD FRSA
|
October 15, 2019

3Q19 Earnings: Financials Up First, Margins Out Front

Article

Earnings kick off this week with Financials posting an early first round of results. In a lower interest rate environment, we’re conscious that some banks may be feeling the squeeze on net interest margins. To baseline analyst and investor expectations, we used Amenity’s NLP tools to examine margin-related commentary from the last round of earnings calls for each of the Financials reporting this week.

We summarize the data and findings for our readers below in Figure 1, which details and ranks each firm’s net polarity related to margin commentary in the last round of earnings calls. We hope this is a useful spatial awareness tool going into the first week of earnings and believe it should, at least partly, constructively condition expectations around the names for which we detected polar sentiment on margin topics.

Figure 1: Financials Reporting from 14-18 October 2019

For reference, we provide some illustrative commentary from previous calls for the top three banks in each column in Figure 1 below:

Positive Margin Forecast Commentary:
  • Morgan Stanley - "The business is on a very strong footing, and over the medium term, the margin will improve as revenues rise."
  • Bank of America - "...on the margin, if we move to 29%, as you see that NII-type activity as loans and deposits continue to grow, that margin will continue to grow."
  • U.S. Bancorp - "...because of that investment on the retail side of the equation, we’ve expected margins to start to improve."
Negative Margin Forecast Commentary:
  • SunTrust - "Looking to the third quarter, we expect net interest margin to decline by 7 to 9 basis points relative to the second quarter."
  • M&T - "So if nothing changed in the second quarter or third quarter, there’s probably some margin compression because of those escrow balances…."
  • BB&T - "We do anticipate another cut there which would put more pressure on margin, but we think, overall, it will be relatively holding there pretty well."

As always, please don’t hesitate to reach out with any questions.

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About Amenity

Amenity Analytics is the industry leader in providing insights from unstructured text by using Natural Language Processing (NLP) assisted by Artificial Intelligence (AI) and Machine Learning (ML). Amenity’s NLP system is a sector-agnostic, language-dependent tool for quantitative text analysis that is deployed across the financial services industry and beyond.

This communication does not represent investment advice. Transcript text provided by S&P Global Market Intelligence.

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