Bank ETFs Are Having a Phenomenal Earnings Season

SVB Financial Group (NasdaqGS: SIVB) first quarter earnings beat and positive guidance helped lift bank sector-related ETFs on Friday.

Among the best performing non-leveraged ETFs of Friday, the iShares U.S. Regional Banks ETF (NYSEArca: IAT) advanced 3.9% and Invesco KBW Bank ETF (NASDAQ: KBWB) increased 2.9%. The broader Financial Select Sector SPDR (NYSEArca: XLF) gained 1.9%.

Meanwhile, SVB Financial Group shares jumped 10.0%. SIVB makes up 4.2% of IAT’s underlying portfolio and 3.6% of KBWB.

SIVB announced earnings of $10.03 per share, compared to average estimates of about $6.94 per share, according to the Associated Press.

The financial services firm also posted revenue of $1.42 billion for the period. Its revenue net of interest expense was $1.41 billion, beating Street forecasts.

The banking segment has been posting strong first quarter earnings results, which has helped the financial sector maintain its momentum.

According to FactSet, the financials sector has recorded the second-largest increase in its expected earnings growth rate of all 11 sectors since the start of the first quarter, from 49.8% to 78.7%, Forbes reports.

The sector could gain traction after more favorable economic conditions and rising interest rates continue to contribute to the higher earnings estimates for the sector.

Further adding to the positive sentiment, analysts anticipate banks will release some of the billions of dollars in loss provisions they accumulated to obviate any loan losses during the post-pandemic fallout.

Additionally, the Federal Reserve previously suspended banks from buying back shares and placed restrictions on dividends, but the the Fed stated that in the first quarter of 2021, banks would be allowed to restart share repurchases.

Looking ahead, banks are shifting their focus to lending activity. Many expect a rebound in loan growth and increased consumer spending as the economy reopens. The banking segment has also provided positive guidance for the year, pointing out that interest income is expected to improve for the second half of the year.

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