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U.S. banking earnings have been an awaited one as 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. 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 an upbeat Q2. All six big U.S. banks were able to beat overall this reporting season. Let’s delve a little deeper:
Big Bank Earnings in Focus
Support from higher interest rates, the First Republic Bank deal, robust consumer and commercial banking businesses and solid loan balance drove JPMorgan’s (JPM - Free Report) third-quarter 2023 earnings to $4.33 per share. The bottom line handily outpaced the Zacks Consensus Estimate of $3.89. Net revenues, as reported, were $39.87 billion, up 22% year over year. The top line also surpassed the Zacks Consensus Estimate of $39.14 billion.
Bank of America’s (BAC - Free Report) third-quarter 2023 earnings of 90 cents per share handily outpaced the Zacks Consensus Estimate of 80 cents. The bottom line compared favorably with 81 cents earned in the prior-year quarter. Quarterly net revenues were $25.17 billion, which beat the Zacks Consensus Estimate of $25.08 billion. The top line grew 3% from the prior-year quarter.
Wells Fargo & Company’s (WFC - Free Report) third-quarter 2023 adjusted earnings per share of $1.39 has outpaced the Zacks Consensus Estimate of $1.25. The figure improved 6.9% year over year. Quarterly total revenues were $20.86 billion, surpassing the Zacks Consensus Estimate of $20.21 billion. Also, the top line climbed 6.6% from the year-ago quarter.
Citigroup Inc.’s (C - Free Report) third-quarter 2023 earnings per share (excluding divestiture-related impacts) of $1.52 outpaced the Zacks Consensus Estimate of $1.26. Revenues, net of interest expenses, moved up 9% year over year to $20.14 billion in the third quarter. The top line outpaced the Zacks Consensus Estimate of $19.36 billion.
The Goldman Sachs Group Inc.’s (GS - Free Report) third-quarter 2023 earnings per share of $5.47 surpassed the Zacks Consensus Estimate of $5.32. Also, the bottom line fell 34% from the year-earlier quarter. Net revenues of $11.82 billion fell 1% from the year-ago quarter. Nonetheless, the top line surpassed the Zacks Consensus Estimate of $11 billion.
Morgan Stanley’s (MS - Free Report) third-quarter 2023 earnings of $1.38 per share handily surpassed the Zacks Consensus Estimate of $1.27. However, the bottom line reflects a decline of 6% from the year-ago quarter. Net revenues were $13.27 billion, up 2% from the prior-year quarter. The top line also beat the Zacks Consensus Estimate of $13.08 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 have lost by a slight margin past week due to the flattening of the yield curve. 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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Bank ETFs in Focus on Upbeat Earnings
U.S. banking earnings have been an awaited one as 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. 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 an upbeat Q2. All six big U.S. banks were able to beat overall this reporting season. Let’s delve a little deeper:
Big Bank Earnings in Focus
Support from higher interest rates, the First Republic Bank deal, robust consumer and commercial banking businesses and solid loan balance drove JPMorgan’s (JPM - Free Report) third-quarter 2023 earnings to $4.33 per share. The bottom line handily outpaced the Zacks Consensus Estimate of $3.89. Net revenues, as reported, were $39.87 billion, up 22% year over year. The top line also surpassed the Zacks Consensus Estimate of $39.14 billion.
Bank of America’s (BAC - Free Report) third-quarter 2023 earnings of 90 cents per share handily outpaced the Zacks Consensus Estimate of 80 cents. The bottom line compared favorably with 81 cents earned in the prior-year quarter. Quarterly net revenues were $25.17 billion, which beat the Zacks Consensus Estimate of $25.08 billion. The top line grew 3% from the prior-year quarter.
Wells Fargo & Company’s (WFC - Free Report) third-quarter 2023 adjusted earnings per share of $1.39 has outpaced the Zacks Consensus Estimate of $1.25. The figure improved 6.9% year over year. Quarterly total revenues were $20.86 billion, surpassing the Zacks Consensus Estimate of $20.21 billion. Also, the top line climbed 6.6% from the year-ago quarter.
Citigroup Inc.’s (C - Free Report) third-quarter 2023 earnings per share (excluding divestiture-related impacts) of $1.52 outpaced the Zacks Consensus Estimate of $1.26. Revenues, net of interest expenses, moved up 9% year over year to $20.14 billion in the third quarter. The top line outpaced the Zacks Consensus Estimate of $19.36 billion.
The Goldman Sachs Group Inc.’s (GS - Free Report) third-quarter 2023 earnings per share of $5.47 surpassed the Zacks Consensus Estimate of $5.32. Also, the bottom line fell 34% from the year-earlier quarter. Net revenues of $11.82 billion fell 1% from the year-ago quarter. Nonetheless, the top line surpassed the Zacks Consensus Estimate of $11 billion.
Morgan Stanley’s (MS - Free Report) third-quarter 2023 earnings of $1.38 per share handily surpassed the Zacks Consensus Estimate of $1.27. However, the bottom line reflects a decline of 6% from the year-ago quarter. Net revenues were $13.27 billion, up 2% from the prior-year quarter. The top line also beat the Zacks Consensus Estimate of $13.08 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 have lost by a slight margin past week due to the flattening of the yield curve. Given the decent valuation of the sector and chances of higher net interest rate margins, investors can keep track of these ETFs for gains.