Financial ETFs: Some Earnings Fall Short of Expectations | ETF Trends

A lack of real revenue growth at big banks is disappointing exchange traded fund (ETF) investors who had positioned for a round of strong earnings.

Financial ETFs have been weak lately as Morgan Stanley (NYSE: MS) reports its quarterly results Thursday.

Keefe, Bruyette & Woods recently penned a research report projecting first-quarter revenue to drop 16% across the industry year-over-year as diminishing capital markets and mortgage banking revenue impedes the bank earnings, report Matthias Rieker, David Benoit, Liz Moyer and Brett Philbin for The Wall Street Journal. Additionally, costs from new regulations and low interest rates have dampened profit margins in the banking sector. [Financial ETFs Fall After Credit-Outlook Downgrade, Citi Results.]

Here is how the biggest banks in the industry did this round:

  • Wells Fargo (NYSE: WFC). Per-share earnings of 67 cents was ahead of estimates, but the $20.3 billion in revenue still fell short of analyst projections and last year’s revenue growth.
  • Morgan Stanley (NYSE: MS). Analysts estimate a 37 cents per share on revenue of $7.9 billion. Last year, Morgan Stanley generated 99 cents a share on $9.1 billion.
  • J.P. Morgan (NYSE: JPM). The company reported higher-than-expected profits of $1.28 and revenue of $25.79 billion, beating out analysts’ estimations of $1.16 a share and revenue of $25.46 billion.
  • Bank of America (NYSE: BAC). BofA revealed profit of 17 cents a share and revenue of $26.88 billion, lower than forecasts of 28 cents a share and revenue of $27.08 billion.
  • Citigroup (NYSE: C).  The bank reported better-than-expected profits of 10 cents a share on revenue of $19.7 billion, beating expectations of 9 cents a share.
  • Goldman Sachs (NYSE: GS). Goldman Sachs posted earnings of $1.56 a share with revenue of $11.9 billion, which was better than the projected 81 cents a share on revenue of $10.3 billion.

For more information on the banking sector, visit our financial category.

  • iShares Dow Jones U.S. Financial Services Index Fund (NYSEArca: IYG). WFC is 10.01%, MS is 2.59%, JPM is 12.34%, BAC is 8.83%, C is 9.37%, GS is 4.67%.
  • SPDR KBW Bank ETF (NYSEArca: KBE). JPM is 8.74%, BAC is 6.69%, C is 7.46%,
  • Financial Select Sector SPDR Fund (NYSEArca: XLF). WFC is 7.78%, MS is 2.13%, JPM is 9.25%, BAC is 6.52%, C is 6.91%, GS is 4.15%.
  • Regional Bank HOLDRS (NYSEArca: RKH). WFC is 20.13%, JPM is 23.31%,

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.