The Art and Ego of Timing Bank Earnings Releases

On Tuesday bank earnings season will begin just as it always does: with JPMorgan Chase's Jamie Dimon and Marianne Lake running through the latest results and then opening up the floor to questions.

First among U.S. banks in size and public stature, JPMorgan is also the first to report its financial results in nearly every quarter. For many analysts, investors and journalists, its press releases (ETA normally 7 a.m.) mark the beginning of earnings season.

There's no rule that makes it so — banks, like other public companies, have wide leeway over when to report their earnings.

Yet earnings season is full of unwritten rules, like JPMorgan going first, that are so rarely challenged they seem to have been etched in stone and handed down from on high — a mix of informal traditions and sheer arbitrary habits.

They also reflect a competition for the prestige — perhaps imaginary — of announcing before one's rivals, observers say. Top banks have been known to jockey to be first in the industry to announce, a position that may offer more media attention and confers the distinction, in some minds, of being the industry leader.

"It's like John, Paul, George and Ringo," said Barry Star, founder of Wall Street Horizon, which tracks data on corporate events. "If you're the leader in the industry you want people to see your name first."

If banks are competing, they don't admit it. The timing of JPMorgan's earnings releases is dictated by practical concerns only, said Joe Evangelisti, a company spokesman.

"There's no race to be first," he said. "We put out the earnings as soon as they're ready."

Certainly practical considerations are involved, observers say.

The earnings schedule tends to go biggest to smallest. Megabanks usually announce first, when media interest is at its highest, then regionals, then community banks.

That makes sense. JPMorgan, with its huge accounting and finance departments, can prepare its reports faster than a community bank. The Securities and Exchange Commission gives companies 35 days from the end of the quarter to file their results, 45 for smaller companies.

But the numbers suggest other drivers are at work.

JPMorgan is also faster than its megabank peers, which have comparable resources. In the past seven years, or 28 quarters, JPMorgan has been beaten out of the gate just twice, both times by Wells Fargo, according to Wall Street Horizon's data.

Arms Race
Star thinks that pattern is no coincidence. He sees evidence that JPMorgan, Wells Fargo and Bank of America have been throwing elbows to get to the front of the line. (Citigroup, he said, "doesn't play this game.")

For the last several quarters, the announcement of earnings dates has followed the same pattern, Star said. First B of A announces its date. Then Wells says it will announce slightly earlier than B of A. Then JPMorgan says it will announce just slightly earlier than Wells, usually by one hour.

Indeed, this quarter JPMorgan decided to release its results right after the markets close on Tuesday, ahead of the Wells Fargo and B of A reports Wednesday morning. JPMorgan's press advisory cited "a conflict with another major financial institution" that planned to issue results early the next day.

Bank of America spokesman Jerry Dubrowski said B of A doesn't try to announce first, though he said that JPMorgan and Wells sometimes compete to announce earlier. Wells did not respond to a request for comment.

It may seem silly that such powerful companies would engage in Price-Is-Right-style brinksmanship over what is, ultimately, a meaningless distinction. But banks crave the media attention and compete for it, just as Iowa and New Hampshire have sometimes shifted the dates of their presidential primaries to get in front of each other, Star said.

"It's about marketing and positioning and leadership, or the perception of leadership," he said.

There's cachet in being seen as a bellwether for the industry — a big company that announces early and gives a foretaste of the quarter. The classic example is the aluminum producer Alcoa, which for many years was the first blue chip to announce. Alcoa's star has dimmed lately — it was kicked off the Dow Jones two years ago — but for many on Wall Street, its announcements are still the opening bell of earnings season. (It missed estimates by at least five or six cents per share on Thursday.)

The once-common theory that bellwether stocks predict the rest of the quarter has been debunked, but some investors still pay extremely close attention to earnings dates, particularly changes to them, to detect signals about companies' pending announcements.

Institutional investors even trade on the theory — supported by some academic research — that companies tend to delay their earnings announcements when they have negative earnings surprises, and report earlier when they have good news. From 2006 to 2013, 55% of public companies that reported at least four days later than expected fell short of earnings expectations, according to a study that used Wall Street Horizon data.

Star, whose firm tracks the event dates for more than 11,000 companies and provides that data to hedge funds and institutional investors, compares the phenomenon to students who sit in the front or the back of the class. When a front-row A-student starts sitting in the back, people take notice, he said.

Anything Wrong?
Accurate or not, this theory helps explain why banks are reluctant to revise their announcement schedule: they don't want investors to read anything into the change and start buying or selling stock. The result is that once-arbitrary scheduling decisions become fixed routines.

Banks have preferences. B of A likes to announce on Wednesdays, its spokesman said. Morgan Stanley and Goldman Sachs tend to announce later than their peers.

And people get curious when these routines change. When JPMorgan scheduled its upcoming announcement for late afternoon instead of the usual 7 a.m. — its first afternoon announcement in nearly a decade — dozens of people called Evangelisti, the spokesman, to ask what the change meant, he said.

Last year, U.S. Bancorp Chief Executive Richard Davis interrupted a conference call to assure analysts that the later-than-usual announcement was a no more than a one-time scheduling quirk.

"I'm glad to see that you are even on the call," he said. "I thought being last we might not have anybody come to our party."

Davis' comment hit on another consideration in timing announcements: analysts' and investors' schedules. When banks announce at the same time or in quick succession, investors don't have as much time to digest each announcement, and analysts have to jump from conference call to conference call.

RIP 'Super Tuesday'
Companies have gotten better at coordinating to avoid overlap, analysts say. For years, the third Tuesday of the month — "super Tuesday" — was the day nearly all the regionals announced, said Scott Siefers, an analyst at Sandler O'Neill. In the last few years they've started spacing it out, much to Siefers' gratitude.

"Super Tuesday was terrible," he said. "It had for some reason been established as a tradition, but it meant that nobody got enough attention paid to them."

Siefers doesn't know if banks get any real advantage from announcing before a competitor, and he says there's no way to tell for sure when it's happening.

Competing to be first remains an earnings-season mystery, but "whether or not there's rhyme or reason to it, it happens," Siefers said.

"Nobody knows exactly why," he said. "But there's a sense that there's an ego element to it."