Wells Fargo & Co (NYSE: WFC) kicked off the earnings parade in the financial sector, revealing a positive indication of where big banks are sitting. Next week, financials exchange traded fund investors will be looking out for other big hitters in the space.
Looking ahead, Citigroup (NYSE: C) will announce its second-quarter earnings results bright and early on Monday, July 14.
On Tuesday, July 15, Goldman Sachs (NYSE: GS) will release data before the market open and JPMorgan Chase (NYSE: JPM) will reveal their numbers at 7:00 am eastern.
Additionally, BlackRock (NYSE: BLK) and U.S. Bancorp (NYSE: USB) will disclose their second quarter results before the market opens Thursday, July 16 while Bank of America (NYSE: BAC) will announce its numbers at 7:00 am ET.
According to Bloomberg data, earnings for banks are projected to decline 3.9% in the second quarter. The financials sector is the only group expected to experience declining profits.
The sector has been weighed down by red tape and compliance to meet new regulatory rules in the wake of the financial crisis. [Financial Sector ETFs Still Face Headwinds]
“The final results in March of the Federal Reserve’s annual stress test on the United States’ 30 largest banks demonstrate both a lack of robustness on the part of some large lending institutions – including Citigroup – as the clear presence of a prominent headwind in the form of elevated compliance, regulatory, and legal costs across the industry,” writes Morningstar analyst Robert Goldsborough.
Additionally, the slowly expanding U.S. economy has also hindered lending growth in banks.
“Another headwind is the U.S. economy,” Goldsborough added. “While it unquestionably has shown some bright spots during the past several years, concerns about a less-than-strong economy generally has weighed on banks, which feel less inclined to lend in such an environment. Less lending means less growth for banks.”
Nevertheless, Wells Fargo announced Friday that second-quarter earnings met expectations and revenue beat Wall Street estimates, CNBC reports.
“I think it’s good news for the U.S. economy. Wells is always a good indicator. They have a national banking platform. Their CEO, John Stumpf, has been particularly bullish on the economy,” Raymond James analyst Anthony Polini said on CNBC. “This is a very good indicator that the economy is on track for an improvement.”
WFC is the largest single holding in the Financial Select Sector SPDR (NYSEArca: XLF), making up 8.9% of the ETF’s overall portfolio. XLF also includes JPM 7.5%, BAC 5.8%, C 5.1%, USB 2.8%, GS 2.4% and BLK 1.4%. The six companies set to report earnings results next week make up 25% of XLF’s overall portfolio. The fund has gained 4.4% year-to-date.
For more information on the financials sector, visit our financial category.
Max Chen contributed to this article.