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U.S. banking earnings have been an awaited one as investors’ view toward the banking sector has dwindled last year, thanks to the U.S. regional banking crisis emanating in March 2023 and investors’ shifting deposits to big banks. Although the crisis has subsided considerably, investors' attention will undoubtedly be focused on the earnings of the big banks.
The financial sector, which accounts for around one-fifth of the S&P 500 Index, had a mixed Q4. Three out of six big U.S. banks were able to beat overall and while the rest three delivered a mixed show this reporting season. Let’s delve a little deeper:
Big Bank Earnings in Focus
Higher interest rates, the First Republic Bank deal, modest improvement in investment banking (IB) business and solid loan balance drove JPMorgan’s (JPM - Free Report) fourth-quarter 2023 adjusted earnings to $3.97 per share. The bottom line handily outpaced the Zacks Consensus Estimate of $3.73. Net revenues, as reported, were $38.57 billion, up 12% year over year. The top line lagged the Zacks Consensus Estimate of $39.09 billion. NII jumped 19% year over year to $24.05 billion.
Bank of America’s (BAC - Free Report) fourth-quarter 2023 adjusted earnings of 70 cents per share outpaced the Zacks Consensus Estimate by a penny. The bottom line compared unfavorably with 85 cents earned in the prior-year quarter. Quarterly net revenues were $21.96 billion, which missed the Zacks Consensus Estimate of $24.07 billion by a considerable margin. The top line declined 10% from the prior-year quarter.
Wells Fargo & Company’s (WFC - Free Report) fourth-quarter 2023 adjusted earnings per share of $1.29 surpassed the Zacks Consensus Estimate of $1.18. The figure improved 15% year over year. The adjusted figure excludes the impacts of expenses from an FDIC special assessment, severance expenses for planned actions and discrete tax benefits related to the resolution of the prior period’s tax matters. Quarterly total revenues were $20.47 billion, surpassing the Zacks Consensus Estimate of $20.31 billion. Also, the top line climbed 2% from the year-ago quarter.
Citigroup Inc.’s (C - Free Report) fourth-quarter 2023 earnings per share (excluding the impact of notable items) of 84 cents surpassed the Zacks Consensus Estimate of 73 cents. Including the impact of notable items in the quarter, C recorded loss per share of $1.16. It registered earnings of $1.16 a year ago. Our estimate was pegged at $1.15. Revenues, net of interest expenses, moved down 3.1% year over year to $17.44 billion in the fourth quarter. The top line missed the Zacks Consensus Estimate of $18.66 billion.
The Goldman Sachs Group, Inc.’s (GS - Free Report) fourth-quarter 2023 earnings per share of $5.48 surpassed the Zacks Consensus Estimate of $3.47. Also, the bottom line increased 65% from the year-earlier quarter. Net revenues for the quarter of $11.32 billion increased 7% from the year-ago quarter. Also, the top line surpassed the Zacks Consensus Estimate of $10.71 billion.
Morgan Stanley’s (MS - Free Report) fourth-quarter 2023 adjusted earnings of $1.13 per share handily surpassed the Zacks Consensus Estimate of $1.05. The bottom line compared unfavorably with $1.26 per share earned in the prior-year quarter. Quarterly net revenues were $12.90 billion, up 1% from the prior-year quarter. The top line beat the Zacks Consensus Estimate of $12.70 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 - Free Report) and Vanguard Financials ETF (VFH - Free Report) .
Financials ETFs like IYG, KBWB, XLF, IAI and VFH were more-or-less muted last week (which was the key reporting season) due to the flattening of the yield curve. Given the decent valuation of the sector and chances of steepening yield curve in 2024, investors can keep track of these ETFs for gains.
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Bank ETFs in Focus on Mixed Q4 Earnings
U.S. banking earnings have been an awaited one as investors’ view toward the banking sector has dwindled last year, thanks to the U.S. regional banking crisis emanating in March 2023 and investors’ shifting deposits to big banks. Although the crisis has subsided considerably, investors' attention will undoubtedly be focused on the earnings of the big banks.
The financial sector, which accounts for around one-fifth of the S&P 500 Index, had a mixed Q4. Three out of six big U.S. banks were able to beat overall and while the rest three delivered a mixed show this reporting season. Let’s delve a little deeper:
Big Bank Earnings in Focus
Higher interest rates, the First Republic Bank deal, modest improvement in investment banking (IB) business and solid loan balance drove JPMorgan’s (JPM - Free Report) fourth-quarter 2023 adjusted earnings to $3.97 per share. The bottom line handily outpaced the Zacks Consensus Estimate of $3.73. Net revenues, as reported, were $38.57 billion, up 12% year over year. The top line lagged the Zacks Consensus Estimate of $39.09 billion. NII jumped 19% year over year to $24.05 billion.
Bank of America’s (BAC - Free Report) fourth-quarter 2023 adjusted earnings of 70 cents per share outpaced the Zacks Consensus Estimate by a penny. The bottom line compared unfavorably with 85 cents earned in the prior-year quarter. Quarterly net revenues were $21.96 billion, which missed the Zacks Consensus Estimate of $24.07 billion by a considerable margin. The top line declined 10% from the prior-year quarter.
Wells Fargo & Company’s (WFC - Free Report) fourth-quarter 2023 adjusted earnings per share of $1.29 surpassed the Zacks Consensus Estimate of $1.18. The figure improved 15% year over year. The adjusted figure excludes the impacts of expenses from an FDIC special assessment, severance expenses for planned actions and discrete tax benefits related to the resolution of the prior period’s tax matters. Quarterly total revenues were $20.47 billion, surpassing the Zacks Consensus Estimate of $20.31 billion. Also, the top line climbed 2% from the year-ago quarter.
Citigroup Inc.’s (C - Free Report) fourth-quarter 2023 earnings per share (excluding the impact of notable items) of 84 cents surpassed the Zacks Consensus Estimate of 73 cents. Including the impact of notable items in the quarter, C recorded loss per share of $1.16. It registered earnings of $1.16 a year ago. Our estimate was pegged at $1.15. Revenues, net of interest expenses, moved down 3.1% year over year to $17.44 billion in the fourth quarter. The top line missed the Zacks Consensus Estimate of $18.66 billion.
The Goldman Sachs Group, Inc.’s (GS - Free Report) fourth-quarter 2023 earnings per share of $5.48 surpassed the Zacks Consensus Estimate of $3.47. Also, the bottom line increased 65% from the year-earlier quarter. Net revenues for the quarter of $11.32 billion increased 7% from the year-ago quarter. Also, the top line surpassed the Zacks Consensus Estimate of $10.71 billion.
Morgan Stanley’s (MS - Free Report) fourth-quarter 2023 adjusted earnings of $1.13 per share handily surpassed the Zacks Consensus Estimate of $1.05. The bottom line compared unfavorably with $1.26 per share earned in the prior-year quarter. Quarterly net revenues were $12.90 billion, up 1% from the prior-year quarter. The top line beat the Zacks Consensus Estimate of $12.70 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 - Free Report) and Vanguard Financials ETF (VFH - Free Report) .
Financials ETFs like IYG, KBWB, XLF, IAI and VFH were more-or-less muted last week (which was the key reporting season) due to the flattening of the yield curve. Given the decent valuation of the sector and chances of steepening yield curve in 2024, investors can keep track of these ETFs for gains.