Bank exchange traded funds (ETFs) have moved lower following quarterly results from the big lenders and could continue to underperform the market, analysts say.
Financial ETFs have been weak after earnings from large banks such as Bank of America (NYSE: BAC), Citigroup (NYSE: C), J.P. Morgan (NYSE: JPM) and Wells Fargo (NYSE: WFC). The stocks dominate sector funds such as SPDR KBW Bank ETF (NYSEArca: KBE) and Financial Select Sector SPDR Fund (NYSEArca: XLF).
“Although investor expectations were seemingly low heading into the quarter, the majority of large regionals sold off particularly hard after releasing numbers as the likelihood for more tepid near-term growth and unsustainably low credit provisions dampened investor enthusiasm this quarter,” said Sterne Agee analysts in a quarterly earnings wrap.
“While the sector is beginning to see relief on expenses and elevated environmental costs, revenue growth will likely remain challenging over the next few quarters as regulatory reform begins to take hold, loan growth remains elusive, and excess liquidity continues to pressure margins,” they wrote.
The bank ETF is in negative territory so far this year, while the iShares S&P 500 (NYSEArca: IVV) is up more than 8%.