It is a big week for financial sector exchange traded funds as five prominent Wall Street banks are ready to report fourth quarter earnings.
Specifically, J.P. Morgan Chase & Co (NYSE: JPM) and Wells Fargo & Company (NYSE: WFC) will reveal fourth quarter earnings results on Wednesday, January 14. On Thursday, January 15, Bank of America Corporation (NYSE: BAC) and Citigroup (NYSE: C) will issue their results. Goldman Sachs Group (NYSE: GS) will round the group on Friday, January 16. Additionally, Morgan Stanley (NYSE: MS) will kick off earnings next week on January 20.
The six banks make up a combined 31.5% of the Financial Select Sector SPDR (NYSEArca: XLF). XLF has increased 11.2% over the past year.
According to analysts polled by Thomson Reuters, corporate earnings are expected to rise 4% over the fourth quarter year-over-year, reports Jessica Menton for International Business Times. However, analysts don’t expect any large surprises out of the financials area. [A Tepid Year for Bank ETFs]
John Butters, senior earnings analyst at FactSet, even believes that financial earnings for the fourth quarter may have only increased a downwardly revised 1.1%, compared to 1.6% growth estimates at the end of the quarter and 8.4% at the start of Q4, reports Wallace Witkowski for MarketWatch.
“During the last two quarters, the banks have beat on [earnings per share], but missed on revenues,” Josh Van Dress, chief investment officer at Abel Capital Management, said in the IBT article. “Sadly, it’s going to be a lot of the same again. Because of that, we’re going to have a lot of volatility in the financial markets for some time to come.”
Additionally, the banks had to issue some write downs after the U.S., Britain and Switzerland placed $3.4 billion in fines on UBS Holdings, Citigroup, JPMorgan, Royal Bank of Scotland, HSBC Holdings and Bank of America in November.
The financial sector, though, could begin to strengthen this year as the Federal Reserve is expected to hike rates, which would bolster profits from lenders.
“Financials did decent in 2014, but they have more upside this year, especially if interest rates start to go up, which means more interest money for them—whether its mortgages or deposits,” J.J. Feldman, managing director and portfolio manager at Miracle Mile Advisors, said in the article. “This finally could be the year that everyone’s been talking about for the last five year where rates actually go up.”
Financial Select Sector SPDR
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