JPMorgan, Wells Fargo, BlackRock… some of the worldโs biggest financial institutions will be releasing their latest quarterly reports on April 14. ย
These banking giants represent hundreds of billions in combined assets. The performance of these banks will be closely watched by traders and investors as they are sure to cause volatility. ย
How do you trade bank stocks? Whatโs happening in the banking industry? We answer these questions and more as well as provide some fantastic trading opportunities. ย
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Focus on earningsย ย
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The upcoming 2023 earnings season kicks off on April 14 with results from major Wall Street banks including JPMorgan Chase (JPM.N), Citigroup Inc (C.N), and Wells Fargo (WFC.N).ย ย ย
Investors will scrutinize these major banks to gauge the effects of the March banking crisis; Silicon Valley Bank was forced to close, and Credit Suisse was bailed out. ย ย
Incredibly, six banks in the S&P 500 are worth more than $1 trillion. They are led by JPMorgan, which has a market cap of more than $459 billion, and Bank of America, valued at more than $328 billion. ย ย
What are experts saying? ย
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Earnings per share for the six largest US banks are expected to drop 10% from the same quarter in 2022, according to Refinitiv.com.ย ย ย
Overall, analysts expect S&P 500 earnings to fall 5.2% in the first quarter of 2023. ย ย
The Q1 weakness would come on the heels of a 3.2% earnings drop in Q4 2022. Analysts have called this back-to-back decline an “earnings recession”, an event that has not occurred since the COVID-19 pandemic in 2020. ย ย
Banks have been suffering from high-interest rates as it makes borrowing loans prohibitively expensive. Add to this the banking crisis which hit the market in March, many investors and private account holders have been withdrawing funds. ย ย
Yet there is hope on the horizon as the US Federal Reserve could slow (or even pause) its rate of interest rate hikes later in 2023 due to slowing inflation. This will stimulate the issuing of more loans and more earnings for banks. ย
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Buying bank stocks ย
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Banks are an important part of the global economy. Banks that contributed to the financial crash of 2008 yet were among the best performers during the post-Covid recovery period. ย ย
Bank stocks are like other types of stocks such as technology and retail. However, they are also affected by different factors, and their value is calculated differently from other financial assets. ย ย ย
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- JPMorgan Chase JPM – -4.9% year-to-date (YTD)
Earnings Per Share (EPS) forecast $3.41ย ย
Revenue forecast Q1ย $36.13Bย ย
Market cap $376.69B ย
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JPMorgan Chase, with a market cap of $376 billion, falls into the “too massive to fail” category of banks. It’s an institution that has weathered the storm of many banking crises and remains of the premier banks in the US. ย
ย Shares of JPMorgan Chase are down 4.9% year-to-date. Its earnings are expected to rise in 2023 from $34.55B to $36.13B. For the past 2 quarters, JPMorgan has beaten earnings forecasts.ย ย
JPMorgan will start the first quarter earnings season on Friday, April 14. ย
Stay up to date on the latest market newsย ย ย ย ย ย ย ย
2 Wells Fargo & Company (WFC), $39,19, -6.22% YTD ย
EPS $1.12ย ย
Revenue forecast Q1 $20.12Bย ย
Market cap $148B ย
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Wells Fargo is one of the largest banks in the USA, with approximately $1.9 trillion in balance-sheet assets.ย ย ย
Shares of Citigroup are Wells Fargo are down -6.22% YTD. Its revenue is expected to climb from $20.1B to $19.66B. Wells Fargo has missed its 2022 Q4 revenue target – $19.66B actual vs $19.99B forecast. ย ย
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3 BlackRock (BLK), $665,97, -6.47% YTD ย
EPS $7.75 ย
Revenue forecast Q1ย $4.26B ย
Market cap $100.05B ย
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BlackRock, like many banking institutions, has been hit hard by rate hikes yet it remains highly profitable. ย ย
BlackRock shares are down -6.47% YTD. Its revenue is expected to climb from $4.34B to $4.26B. The company outperformed estimates in the past two quarters. ย ย
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4 Citigroup Inc. (C), $46,92, +2.49% YTD ย
EPS $1.7ย ย
Revenue forecast Q1 $20.05Bย ย
Market cap $91.33Bย ย
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Citigroup remains a popular bank and has grabbed a market cap of $91 billion. ย ย
Shares of Citigroup are up +2% YTD. Its revenue is expected to climb from $18B to $20B. Citigroup has managed to beat four of its past revenue forecasts. ย
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4 major factors that affect bank’s stocks ย
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1 Interest rates ย
Banks are sensitive to interest rate changes. Unlike most sectors, banks do well when interest rates rise; higher interest rates mean a better return on the loans they issue. ย
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However, higher interest rates can deter many investors from banks and slow customer spending. Since 2022, the US Fed has issued aggressive rate hikes. While good for banks in the long term, the short-term results mean fewer loans being issued and many companies and individuals defaulting on the existing ones. ย
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2 Volatility ย
Some banks do well when there is heightened volatility in the financial market. This is because this volatility leads to more trading in the markets.ย ย ย
Goldman Sachs published its earnings in July 2022 revealing its share price rose sharply due to its trading division.ย ย ย
Volatility within the banking sector, however, is bad news for these stocks which promise security to clients. The collapse of Silicon Valley and Credit Suisse in March 2023 showed how the banking sector can be hugely affected by volatility. ย
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3 Housing data ย
The housing sector is a great way to analyze many areas of the economy, especially the banking sector. Banks that focus on mortgages such as Wells Fargo do well when there is a housing boom. ย ย
Banks also do well when housing data such as building permits, housing projects, and mortgage approvals are doing well. ย
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4 Earnings ย
Like all companies, banks report earnings that will affect their stocks. Good earnings push their share prices higher and vice versa. ย ย
When an earnings report is released, traders watch the top-line figures such as revenue and profits. They will also examine key profitability ratios such as margins and the CET 1 ratio. ย ย
Other factors ย ย
Finally, other factors move bank stocks including regulations, corporate activity such as mergers and acquisitions, management changes, as well as payouts (ie. dividends). ย
Check out more top companies releasing their earnings in April 2023:ย ย
Company โ EPS Forecast / Revenue Forecast / Market capย ย
Tuesday, April 18, 2023ย ย
Netflix (NFLX) – $2.88 – $8.17B – $155.11Bย ย
Wednesday, April 19, 2023ย ย
Tesla (TSLA) – $0.8566 – $23.62B – $618.27Bย ย
Nasdaq Inc (NDAQ) $0.6504 – $906.38M – $26.6B ย ย ย
Tuesday, April 25, 2023ย ย
Alphabet A (GOOGL) – $1.08 – $68.9B – $1.34Tย ย
Wednesday, April 26, 2023ย ย
Meta Platforms (META) – $2.01 – $27.64B – $552.41Bย ย
Thursday, April 27, 2023ย ย
Apple (AAPL) – $1.43 – $92.63B – $2.63T ย ย
Microsoft (MSFT) – $2.24 – $51.13B – $2.14T ย ย
Amazon.com (AMZN) – $0.2072 – $124.62B – $1.05Tย ย
Friday, April 28, 2023ย ย
Exxon Mobil (XOM) – $2.67 – $88.32B – $472.76B ย ย
Chevron (CVX) – $3.55 – $50.19B – $324.04Bย ย
Stay up to date on the latest market newsย ย ย ย ย ย ย ย ย
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