Financial stocks and sector-related exchange traded funds were under the microscope Monday as bank stocks kicked off the second-quarter earnings season, with Citigroup (NYSE: C) posting its latest quarterly results and many more to follow up after.
The Financial Select Sector SPDR (NYSEArca: XLF), the largest financial services ETF, was 0.5% lower on Monday.
Citigroup revealed second-quarter net income was 7% higher year-over-year, with quarterly profits at $4.8 billion, compared to $4.5 billion, and a better-than-expected per-share earnings of $1.95, the Wall Street Journal reports.
Additionally, revenue at the bank was a slightly better-than-expected $18.76 billion, or up 2% from $18.47 billion a year ago. In comparison, analysts polled by Refintiv previously projected revenue of $18.5 billion.
Monday marked the first day of the big earnings season with Citigroup being the first of the big U.S. banks to report second-quarter results.
Market observers have previously warned that Wall Street banks could face pressure as tepid market volatility could have contributed to more muted trading desk activity. Furthermore, the Federal Reserve has signaled its intentions to cut interest rates, which would further hurt the banking industry’s ability to generate profits from lending.
Mixed results from Citigroup’s core trading weighed on the banking segment. While trading revenue was up 4% to $4.1 billion, it included a one-time gain on the bank’s take in a trading platform. Taking away the one-time gain, Citigroup’s core trading revenue actually declined 5% year-over-year, which would mark the third straigth quarter of declines in the trading unit.
Banks have previously warned that clients remained cautious despite the record run in the stock market and were not paying banks to help them leverage new bets.
Looking ahead, among the big bank names, Goldman Sachs (NYSE: GS) is up to bat on Tuesday before the market open. Wells Fargo (NYSE: WFC) will report earnings on Tuesday before the bell. J.P. Morgan also reports Tuesday ahead of the market open. Bank of America (NYSE: BAC) will announce results on Wednesday before the bell. Lastly, Morgan Stanley (NYSE: MS) is scheduled to report quarterly results on Thursday before the market open.
XLF has been a go-to, sector-specific ETF to track these big Wall Street names. The ETF includes a 7.9% tilt toward BAC, 5.8% in WFC, 5.1% in C, 2.2% in GS and 1.7% in MS.
For more information on the financial sector, visit our financial category.