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The financial sector, which accounts for around one-fifth of the S&P 500 Index, had an upbeat Q3. Only five out of six big U.S. banks were able to beat overall. Finance sector earnings are projected to decline 11.0% on 3.0% higher revenues in Q3, which follows the 18.9% earnings decline on 4.7% higher revenues in Q2 of 2022, per Zacks Earnings Trends issued on Oct 12, 2022.
The upbeat earnings led to a rally in financial ETFs past week (as of Oct 18, 2022). SPDR S&P Bank ETF (KBE - Free Report) gained about 3% past week. Let’s take a look at the big banks’ earnings which released lately.
Big Bank Earnings in Focus
Higher loan balance, rising rates and solid markets performance drive JPMorgan’s (JPM - Free Report) third-quarter 2022 earnings of $3.12 per share, which surpassed the Zacks Consensus Estimate of $2.97. The results included $959 million or 24 cents of net investment securities losses in the Corporate segment. Our estimate for earnings was $2.98 per share. Net revenues, as reported, were $32.7 billion, up 10% year over year. The top line beat the Zacks Consensus Estimate of $31.3 billion. Our estimate for the metric was $32.1 billion.
Citigroup Inc.’s (C - Free Report) third-quarter 2022 earnings per share (excluding Asia consumer divestiture-related impacts) of $1.50 have handily outpaced the Zacks Consensus Estimate of $1.46. Revenues, net of interest expenses, moved up 6% year over year to $18.5 billion in the third quarter. The top line outpaced the Zacks Consensus Estimate of $18.37 billion.
Wells Fargo’s (WFC - Free Report) third-quarter 2022 adjusted earnings per share of $1.30 outpaced the Zacks Consensus Estimate of $1.09. Total revenues came in at $19.51 billion, surpassing the Zacks Consensus Estimate of $18.72 billion. Also, the top line grew 4% from the year-ago quarter.
The Goldman Sachs Group, Inc.’s (GS - Free Report) third-quarter 2022 earnings per share of $8.25 have surpassed the Zacks Consensus Estimate of $7.47. However, the bottom line fell 44.7% from the year-earlier quarter. Our estimate for earnings was $8.24 per share. Net revenues of $11.98 billion fell 12% from the year-ago quarter. Nonetheless, the top line beat the Zacks Consensus Estimate of $11.26 billion. Our estimate for the metric was $11.13 billion.
Bank of America’s (BAC - Free Report) third-quarter 2022 earnings of 81 cents per share surpassed the Zacks Consensus Estimate of 79 cents. The bottom line compared unfavorably with 85 cents earned in the prior-year quarter. Our estimate for earnings was also 81 cents per share. Net revenues were $24.5 billion, which beat the Zacks Consensus Estimate of $23.6 billion. The top line grew 7.6% from the prior year. Our estimate for the metric was $24.2 billion.
Morgan Stanley (MS - Free Report) posted third-quarter results that missed analysts’ expectations as investment banking revenue collapsed by 55%. Earnings of $1.47 a share fell shy of $1.49 estimate of analysts surveyed by Refinitiv, quoted on CNBC. Revenues of $12.99 billion too missed $13.3 billion of estimate.
ETF Impact
All the aforementioned companies have considerable exposure in funds like iShares U.S. Financial Services ETF (IYG - Free Report) , Invesco KBW Bank (KBWB - Free Report) , Financial Select Sector SPDR (XLF - Free Report) , U.S. Broker-Dealers Index Fund (IAI - Free Report) and Vanguard Financials ETF (VFH - Free Report) . IYG, KBWB, XLF, IAI and VFH have advanced 4.3%, 3.9%, 4.2%, 3.7% and 4%, respectively in the past week. The sector may gain from rising rates (thanks to rising inflation and faster rate hikes). Given the decent valuation of the sector and chances of higher net interest rate margins, investors can keep a track of these ETFs for gains.
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Financial ETFs Up on Upbeat Earnings
The financial sector, which accounts for around one-fifth of the S&P 500 Index, had an upbeat Q3. Only five out of six big U.S. banks were able to beat overall. Finance sector earnings are projected to decline 11.0% on 3.0% higher revenues in Q3, which follows the 18.9% earnings decline on 4.7% higher revenues in Q2 of 2022, per Zacks Earnings Trends issued on Oct 12, 2022.
The upbeat earnings led to a rally in financial ETFs past week (as of Oct 18, 2022). SPDR S&P Bank ETF (KBE - Free Report) gained about 3% past week. Let’s take a look at the big banks’ earnings which released lately.
Big Bank Earnings in Focus
Higher loan balance, rising rates and solid markets performance drive JPMorgan’s (JPM - Free Report) third-quarter 2022 earnings of $3.12 per share, which surpassed the Zacks Consensus Estimate of $2.97. The results included $959 million or 24 cents of net investment securities losses in the Corporate segment. Our estimate for earnings was $2.98 per share. Net revenues, as reported, were $32.7 billion, up 10% year over year. The top line beat the Zacks Consensus Estimate of $31.3 billion. Our estimate for the metric was $32.1 billion.
Citigroup Inc.’s (C - Free Report) third-quarter 2022 earnings per share (excluding Asia consumer divestiture-related impacts) of $1.50 have handily outpaced the Zacks Consensus Estimate of $1.46. Revenues, net of interest expenses, moved up 6% year over year to $18.5 billion in the third quarter. The top line outpaced the Zacks Consensus Estimate of $18.37 billion.
Wells Fargo’s (WFC - Free Report) third-quarter 2022 adjusted earnings per share of $1.30 outpaced the Zacks Consensus Estimate of $1.09. Total revenues came in at $19.51 billion, surpassing the Zacks Consensus Estimate of $18.72 billion. Also, the top line grew 4% from the year-ago quarter.
The Goldman Sachs Group, Inc.’s (GS - Free Report) third-quarter 2022 earnings per share of $8.25 have surpassed the Zacks Consensus Estimate of $7.47. However, the bottom line fell 44.7% from the year-earlier quarter. Our estimate for earnings was $8.24 per share. Net revenues of $11.98 billion fell 12% from the year-ago quarter. Nonetheless, the top line beat the Zacks Consensus Estimate of $11.26 billion. Our estimate for the metric was $11.13 billion.
Bank of America’s (BAC - Free Report) third-quarter 2022 earnings of 81 cents per share surpassed the Zacks Consensus Estimate of 79 cents. The bottom line compared unfavorably with 85 cents earned in the prior-year quarter. Our estimate for earnings was also 81 cents per share. Net revenues were $24.5 billion, which beat the Zacks Consensus Estimate of $23.6 billion. The top line grew 7.6% from the prior year. Our estimate for the metric was $24.2 billion.
Morgan Stanley (MS - Free Report) posted third-quarter results that missed analysts’ expectations as investment banking revenue collapsed by 55%. Earnings of $1.47 a share fell shy of $1.49 estimate of analysts surveyed by Refinitiv, quoted on CNBC. Revenues of $12.99 billion too missed $13.3 billion of estimate.
ETF Impact
All the aforementioned companies have considerable exposure in funds like iShares U.S. Financial Services ETF (IYG - Free Report) , Invesco KBW Bank (KBWB - Free Report) , Financial Select Sector SPDR (XLF - Free Report) , U.S. Broker-Dealers Index Fund (IAI - Free Report) and Vanguard Financials ETF (VFH - Free Report) . IYG, KBWB, XLF, IAI and VFH have advanced 4.3%, 3.9%, 4.2%, 3.7% and 4%, respectively in the past week. The sector may gain from rising rates (thanks to rising inflation and faster rate hikes). Given the decent valuation of the sector and chances of higher net interest rate margins, investors can keep a track of these ETFs for gains.