Disappointing Earnings Drag on Financial Sector ETFs | ETF Trends

Financial stocks and sector-related exchange traded funds retreated Monday after Goldman Sachs (NYSE: GS) announced a decline in first-quarter profits and Citigroup (NYSE: C) revealed a worse-than-expected hit to revenue.

The Financial Select Sector SPDR (NYSEArca: XLF), the largest financial sector-related ETF on the market, declined 0.5% on Monday.

Dragging on the financial sector, Goldman Sachs posted a quarterly profit of $2.25 billion, or $5.71 per share, on revenue of $8.81 billion, which were both lower year-over-year, the Wall Street Journal reports.

Goldman shares decreased 2.9% on the announcement. GS makes up 2.3% of XLF’s underlying portfolio.

The bank said that trading revenue declined 18% to $3.61 billion compared to a year ago, mirroring J.P. Morgan Chase’s recently announced 17% drop when it reported last week.

Goldman has been investing to expand its businesses, including a growing consumer bank, partnering with Apple (NasdaqGS: AAPL) on its first credit card, raising new investment funds and building data services. However, they “haven’t yet hit their stride,” Chief Financial Officer Stephen Scherr said earlier this year. Meanwhile, the new projects required more than $1 billion of investment spending, and investors are losing patience.

Meanwhile, Citigroup said its first quarter profits rose 2% year-over-year to $4.7 billion or $1.87 per share, but its revenue was $18.6 billion or 2% lower from $18.9 billion a year ago, the Wall Street Journal reports.

Citigroup shares fell 0.1% Monday. C makes up 5.0% of XLF’s underlying portfolio.

Citi’s trading unit has been struggling under unfavorable market conditions, with first-quarter trading revenue down 5% to $4.3 billion. Citigroup, along with other banks, have warned that client activity has not recovered after dispersing at the end of last year.

“Our earnings reflect the progress we are making to improve our return on and return of capital,” CEO Michael Corbat said in a release. “We remain committed to executing our strategy and continuing to make steady progress towards our financial targets.”

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