Earnings Roundup: Banc of California Inc and U.S. Bancorp

Banc of California Inc (NYSE:BANC) and U.S. Bancorp (NYSE:USB) both beat estimates for quarterly earnings and revenue

Oct 19, 2016 at 10:53 AM
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Earnings are front and center this week, as the calendar of quarterly reports heats up. Among the names whose results have hit the Street this morning are financial firms Banc of California Inc (NYSE:BANC) and U.S. Bancorp (NYSE:USB). Both bank stocks are moving higher so far today, which could have some bearish traders sweating.

Starting with BANC, the company reported earnings and revenue that beat analyst expectations, and authorized a buyback of up to 10% of outstanding shares. As a result, the stock is up 19% to $13.40. This comes just a day after a Seeking Alpha blog post alleged the bank had ties with known fraudster Jason Galanis, sending shares of BANC plummeting more than 30% to an annual low of $10.93. Banc of California Inc released a statement last night assuring investors it is aware of the accusation and has initiated an independent investigation.

Even with today's bounce, BANC is sitting well short of its early Tuesday trading levels. In fact, prior to yesterday's plunge, the shares were in positive year-to-date territory, but now find themselves in the red.

Meanwhile, bearish sentiment toward the stock has been building. Short interest on BANC surged more than 85% during the two most recent reporting periods, and currently accounts for 12.7% of the stock's total float. Meanwhile, half of the brokerage firms following the stock rate BANC a "hold" or a "strong sell."

Options traders have been pessimistic, as well, though volume tends to be light on an absolute basis. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have purchased 2.45 BANC puts for each call over the past 10 weeks. And the action has picked up recently on both sides of the fence, with put and call open interest each seated in the 100th percentile of their respective annual ranges. Today, Banc of California Inc's (NYSE:BANC) options pits are on fire, with calls taking a rare lead over puts, changing hands at 35 times the expected intraday rate.

USB also reported stronger-than-expected earnings today, boosting the shares 1.3% to $43.53. After a rough start to the year, the stock has fought back. In fact, the shares have spent the past month just above support at the $42.50 level, which coincides with their year-to-date breakeven mark, as well as the 80-day moving average.

Despite this triple-barreled layer of support, traders and analysts have been skeptical toward USB of late. Out of 22 analysts tracking the shares, 16 maintain a "hold" or worse opinion. Short interest is relatively low, representing just 1.1% of USB's total float, but these bearish bets have been ticking higher in recent weeks.

Not to mention, in the options pits, speculators have strongly favored the stock's long puts over calls. U.S. Bancorp (NYSE:USB) currently holds a 10-day ISE/CBOE/PHLX put/call volume ratio of 4.21 -- higher than 79% of all readings taken in the past year. The stock's options are accelerated this morning, at 1.5 times the usual intraday pace, with calls doubling puts so far.

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