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U.S. banking earnings have probably not been so awaited since the 2008 financial crisis. Investors’ view toward the banking sector has dwindled this year, thanks to the U.S. regional banking crisis emanating in March 2023 and investors’ shifting deposits to big banks.
The financial sector, which accounts for around one-fifth of the S&P 500 Index, had an upbeat Q1. There were a lot of favorable aspects, as the larger players were able to increase their margins due to the rise in interest rates, while sturdy demand for loans supported the growth of their loan portfolios.
As many as five out of six big U.S. banks were able to beat overall, while one bank came in with mixed earnings. Let’s delve a little deeper:
Big Bank Earnings in Focus
Support from the consumer banking business, higher rates and decent loan demand drove JPMorgan’s (JPM - Free Report) first-quarter 2023 adjusted earnings of $4.10 per share, which surpassed the Zacks Consensus Estimate of $3.41. Our estimate for earnings was $3.01 per share. Net revenues, as reported, were $38.3 billion, up 25% year over year. The top line also beat the Zacks Consensus Estimate of $35.2 billion. Our estimate for the metric was $33.7 billion.
JPMorgan's updated forecast for net interest income for this year was well-received by the market, even though management has indicated that 2023 will likely be the peak year for this metric in the coming years. JPM has a Zacks Rank #2 (Buy).
Bank of America’s (BAC - Free Report) first-quarter 2023 earnings of 94 cents per share surpassed the Zacks Consensus Estimate of 79 cents. The bottom line compared favorably with 80 cents earned in the prior-year quarter. Our estimate for earnings was 75 cents per share.
Investors were pleased by solid net interest income (NII) growth and robust trading performance despite a fall in deposits and a deteriorating economic outlook. Quarterly net revenues were $26.3 billion, which beat the Zacks Consensus Estimate of $25.07 billion. The top line grew 13% from the prior-year quarter. Our estimate for the metric was $24.62 billion.
Wells Fargo & Company’s (WFC - Free Report) first-quarter 2023 earnings per share of $1.23 (up 35% year over year) outpaced the Zacks Consensus Estimate of $1.15 thanks to higher net interest income (NII), rising rates and solid average loan growth. The fall in non-interest expenses acted as another tailwind.
Yet, dismal non-interest income, higher provisions and weakness in the mortgage business were the major undermining factors. Quarterly total revenues were $20.73 billion, outpacing the Zacks Consensus Estimate of $20.08 billion. Also, the top line increased 17% from the year-ago quarter.
Citigroup Inc.’s (C - Free Report) first-quarter 2023 earnings per share (excluding divestiture-related impacts) of $1.86 have outpaced the Zacks Consensus Estimate of $1.66. Our estimate for earnings was $1.40 per share. Citigroup witnessed revenue growth in the quarter, backed by higher revenues in the Institutional Clients Group, and Personal Banking and Wealth Management segments.
However, the higher cost of credit was a spoilsport. Revenues, net of interest expenses, moved up 12% year over year to $21.44 billion in the first quarter. The top line outpaced the Zacks Consensus Estimate of $17.91 billion. Our estimate for the metric was $18.9 billion.
The Goldman Sachs Group, Inc.’s (GS - Free Report) first-quarter 2023 earnings per share of $8.79 surpassed the Zacks Consensus Estimate of $8.14. Our estimate for earnings was $7.70 per share. However, net revenues of $12.22 billion fell 5% from the year-ago quarter. Also, the top line missed the Zacks Consensus Estimate of $13.03 billion. Our estimate for total revenues was $12.8 billion.
Morgan Stanley’s (MS) first-quarter 2023 earnings of $1.70 per share surpassed the Zacks Consensus Estimate of $1.67. Our estimate for earnings was $1.69. Shares of MS lost more than 4% in pre-market trading on Apr 19 despite better-than-expected earnings.
Dismal trading and investment banking performance weighed on investor sentiments. Quarterly net revenues were $14.52 billion, down 2% from the prior-year quarter. The top line beat the Zacks Consensus Estimate of $13.91 billion. Our estimate for revenues was $13.47 billion.
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) and Vanguard Financials ETF (VFH - Free Report) .
Financials ETFs like IYG, KBWB, XLF, IAI and VFH have advanced in the range of 3.6% to 5.2% in the past week (as of Apr 19, 2023). Given the decent valuation of the sector and chances of higher net interest rate margins, investors can keep track of these ETFs for gains.
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Time for Big Bank ETFs on Upbeat Earnings?
U.S. banking earnings have probably not been so awaited since the 2008 financial crisis. Investors’ view toward the banking sector has dwindled this year, thanks to the U.S. regional banking crisis emanating in March 2023 and investors’ shifting deposits to big banks.
The financial sector, which accounts for around one-fifth of the S&P 500 Index, had an upbeat Q1. There were a lot of favorable aspects, as the larger players were able to increase their margins due to the rise in interest rates, while sturdy demand for loans supported the growth of their loan portfolios.
As many as five out of six big U.S. banks were able to beat overall, while one bank came in with mixed earnings. Let’s delve a little deeper:
Big Bank Earnings in Focus
Support from the consumer banking business, higher rates and decent loan demand drove JPMorgan’s (JPM - Free Report) first-quarter 2023 adjusted earnings of $4.10 per share, which surpassed the Zacks Consensus Estimate of $3.41. Our estimate for earnings was $3.01 per share. Net revenues, as reported, were $38.3 billion, up 25% year over year. The top line also beat the Zacks Consensus Estimate of $35.2 billion. Our estimate for the metric was $33.7 billion.
JPMorgan's updated forecast for net interest income for this year was well-received by the market, even though management has indicated that 2023 will likely be the peak year for this metric in the coming years. JPM has a Zacks Rank #2 (Buy).
Bank of America’s (BAC - Free Report) first-quarter 2023 earnings of 94 cents per share surpassed the Zacks Consensus Estimate of 79 cents. The bottom line compared favorably with 80 cents earned in the prior-year quarter. Our estimate for earnings was 75 cents per share.
Investors were pleased by solid net interest income (NII) growth and robust trading performance despite a fall in deposits and a deteriorating economic outlook. Quarterly net revenues were $26.3 billion, which beat the Zacks Consensus Estimate of $25.07 billion. The top line grew 13% from the prior-year quarter. Our estimate for the metric was $24.62 billion.
Wells Fargo & Company’s (WFC - Free Report) first-quarter 2023 earnings per share of $1.23 (up 35% year over year) outpaced the Zacks Consensus Estimate of $1.15 thanks to higher net interest income (NII), rising rates and solid average loan growth. The fall in non-interest expenses acted as another tailwind.
Yet, dismal non-interest income, higher provisions and weakness in the mortgage business were the major undermining factors. Quarterly total revenues were $20.73 billion, outpacing the Zacks Consensus Estimate of $20.08 billion. Also, the top line increased 17% from the year-ago quarter.
Citigroup Inc.’s (C - Free Report) first-quarter 2023 earnings per share (excluding divestiture-related impacts) of $1.86 have outpaced the Zacks Consensus Estimate of $1.66. Our estimate for earnings was $1.40 per share. Citigroup witnessed revenue growth in the quarter, backed by higher revenues in the Institutional Clients Group, and Personal Banking and Wealth Management segments.
However, the higher cost of credit was a spoilsport. Revenues, net of interest expenses, moved up 12% year over year to $21.44 billion in the first quarter. The top line outpaced the Zacks Consensus Estimate of $17.91 billion. Our estimate for the metric was $18.9 billion.
The Goldman Sachs Group, Inc.’s (GS - Free Report) first-quarter 2023 earnings per share of $8.79 surpassed the Zacks Consensus Estimate of $8.14. Our estimate for earnings was $7.70 per share. However, net revenues of $12.22 billion fell 5% from the year-ago quarter. Also, the top line missed the Zacks Consensus Estimate of $13.03 billion. Our estimate for total revenues was $12.8 billion.
Morgan Stanley’s (MS) first-quarter 2023 earnings of $1.70 per share surpassed the Zacks Consensus Estimate of $1.67. Our estimate for earnings was $1.69. Shares of MS lost more than 4% in pre-market trading on Apr 19 despite better-than-expected earnings.
Dismal trading and investment banking performance weighed on investor sentiments. Quarterly net revenues were $14.52 billion, down 2% from the prior-year quarter. The top line beat the Zacks Consensus Estimate of $13.91 billion. Our estimate for revenues was $13.47 billion.
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) and Vanguard Financials ETF (VFH - Free Report) .
Financials ETFs like IYG, KBWB, XLF, IAI and VFH have advanced in the range of 3.6% to 5.2% in the past week (as of Apr 19, 2023). Given the decent valuation of the sector and chances of higher net interest rate margins, investors can keep track of these ETFs for gains.