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Bank ETFs in Focus on Mixed Q1 Earnings

Sanghamitra Saha
·4 min read

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 as rising rate worries still loom.

For example, JPMorgan JPM experienced a decline in its shares on Friday despite surpassing profit expectations, as CEO Jamie Dimon highlighted "inflationary pressures" and Fed’s tight monetary policy as sources of concern. Against this backdrop, we detail Q1 earnings results of key big banks.

Notably, the financial sector, which accounts for around one-fifth of the S&P 500 Index, had an upbeat-to-mixed Q1. Most of six big U.S. banks were able to beat overall this reporting season. Let’s delve a little deeper (read: 4 Top-Performing ETF Areas of Last Week):

Big Bank Earnings in Focus

High interest rates, the First Republic Bank deal, improvement in investment banking (IB) business and solid loan balance drove JPMorgan’s (JPM) first-quarter 2024 adjusted earnings to $4.63 per share. The bottom line handily surpassed the Zacks Consensus Estimate of $4.18. Net revenues, as reported, were $41.93 billion, up 9% year over year. The top line outpaced the Zacks Consensus Estimate of $40.75 billion.

Bank of America’s BAC first-quarter 2024 adjusted earnings of 83 cents per share outpaced the Zacks Consensus Estimate of 77 cents. The bottom line compared unfavorably with the 94 cents earned in the prior-year quarter. Net revenues were $25.82 billion, which beat the Zacks Consensus Estimate of $25.28 billion. However, the top line declined 1.7% from the prior-year quarter.

Wells Fargo & Company’s WFC first-quarter 2024 adjusted earnings per share of $1.26 topped the Zacks Consensus Estimate of $1.10. The adjusted figure excludes the impacts of expenses from the FDIC special assessment. In the prior-year quarter, the company reported earnings per share of $1.23. Quarterly total revenues were $20.86 billion, surpassing the Zacks Consensus Estimate of $20.17 billion. Also, the top line rose 1.9% from the year-ago quarter.

Citigroup Inc.’s C first-quarter 2024 net income from continuing operations per share of $1.58 surpassed the Zacks Consensus Estimate of $1.13. However, the metric declined 28% from the year-ago quarter. Revenues, net of interest expenses, moved down 2% year over year to $21.1 billion in the first quarter. The top line missed the Zacks Consensus Estimate of $20.3 billion.

The Goldman Sachs Group Inc.’s GS first-quarter 2024 earnings per share of $11.58 surpassed the Zacks Consensus Estimate of $8.54. Also, the bottom line increased 16.3% from the year-earlier quarter. Net revenues for the quarter of $14.21 billion increased 16.3% from the year-ago quarter. Also, the top line surpassed the Zacks Consensus Estimate of $12.89 billion.

Morgan Stanley’s MS first-quarter 2024 earnings of $2.02 per share handily outpaced the Zacks Consensus Estimate of $1.69. The bottom line compared favorably with $1.70 per share reported in the prior-year quarter. Quarterly net revenues were $15.14 billion, up 4% from the prior-year quarter. The top line beat the Zacks Consensus Estimate of $14.47 billion.

ETF Impact

All the aforementioned companies have considerable exposure in funds like iShares U.S. Financial Services ETF IYG, Invesco KBW Bank KBWB, Financial Select Sector SPDR XLF, U.S. Broker-Dealers Index Fund IAI and Vanguard Financials ETF VFH.

Financials ETFs like IYG, KBWB, XLF, IAI and VFH were more-or-less downbeat past week (which was the key reporting season). The fund IYG was off 3.9%, KBWB has lost 7.1%, XLF has retreated 3.6%, IAI has slumped 3.8% and VFH has dropped 3.7% past week due to the current flattening of the yield curve.

Having said all, given the decent valuation of the sector and chances of steepening yield curve in 2024, investors can keep track of these ETFs for gains.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

The Goldman Sachs Group, Inc. (GS) : Free Stock Analysis Report

Bank of America Corporation (BAC) : Free Stock Analysis Report

Wells Fargo & Company (WFC) : Free Stock Analysis Report

JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report

Morgan Stanley (MS) : Free Stock Analysis Report

Citigroup Inc. (C) : Free Stock Analysis Report

Financial Select Sector SPDR ETF (XLF): ETF Research Reports

Invesco KBW Bank ETF (KBWB): ETF Research Reports

iShares U.S. Broker-Dealers & Securities Exchanges ETF (IAI): ETF Research Reports

iShares U.S. Financial Services ETF (IYG): ETF Research Reports

Vanguard Financials ETF (VFH): ETF Research Reports

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Zacks Investment Research