What Do Banking Earnings Tell About These Financial ETFs?

The financial sector, which accounts for around one-fifth of the S&P 500 index, is now busy with Q1 earnings releases. The going is good so far, with four big banks crushing estimates on both lines, one reporting mixed results and Goldman falling shy of both counts.

The Zacks Sector Rank for banks is in the top 31% and Industry Rank is in the top 26%. The backdrop should favor the banks along with the course of oil, the stance of the Fed and proposed policies of Trump.

However, the downtrend in the benchmark U.S. Treasury yields since mid-March thanks to a dovish Fed rate hike outlook and geopolitical risks is a concern for the banking sector. Let’s take a look at banking earnings in detail:

Big Bank Earnings in Focus

JP Morgan (JPM – Free Report) reported earnings of $1.65 per share beating the Zacks Consensus Estimate of $1.51 in the first quarter of 2017. Also, the figure reflected a 22% rise from the year-ago period. Notably, the results included a legal charge of $218 million and a tax benefit of $373 million.

Managed net revenue of $25.6 billion in the quarter was up 6% year over year. Also, it compared favorably with the Zacks Consensus Estimate of $24.6 billion. Improved fixed income and equity trading, as well as solid activity in investment banking, boosted results.

Wells Fargo (WFC – Free Report) earned $1.00 per share in Q1, beating the Zacks Consensus Estimate by $0.03. Moreover, the figure compared favorably with the prior-year quarter’s earnings of $0.99 per share. The quarter’s total revenue of $22.0 billion lagged the Zacks Consensus Estimate of $22.1 billion. Revenues were in line on a year-over-year basis.

Citigroup Inc.’s (C – Free Report) earnings per share of $1.35 for Q1 were ahead of the Zacks Consensus Estimate of $1.24. Notably, results reflect one-time adjustments of a penny. Earnings compared favorably with the year-ago figure of $1.10 per share. Revenues increased 3% year over year to $18.12 billion, surpassing the Zacks Consensus Estimate of $17.81 billion. Higher revenues in the institutional clients group and global consumer banking were partially offset by a decline in corporate/other revenues.