Banking crisis? Some banks are making record profits.
Investor's Business Daily analyzed data from S&P Global Market Intelligence, MarketSmith and S&P Global Market Intelligence to find that ten banks in the SPDR S&P Bank ETF KBE (KBE) are expected post earnings per share growth of 40% or more in the first three months.
These banks are outliers in comparison to the struggling banks, where profits are expected drop. Investors may be calmed by banks with high earnings growth as they report their first-quarter results next week.
Investors will continue to assess the likelihood of an impending recession as they gauge bank earnings over the coming week. According to David Trainer, CEO at investment research firm New Constructs, "Bank earnings usually set the scene for the rest of the earnings season."
Banking on Bank Earnings
Bank earnings are at stake this quarter. Trainer says that the bank's earnings reports will "set up the stage" for those investors who are trying to gauge how the economy is doing. Financials make up 13% of S&P 500 and are the third most important sector.
Wells Fargo, JPMorgan Chase and PNC Financial all released their results on the 14th of April. What they say can help investors predict the likelihood of a recession. The reports will also show how the smaller banks compare to the larger banks.
JPMorgan Chase has posted a 56% increase in profit for the first quarter. This was well ahead of the expected average earnings growth of 11.4% from the 100 bank stocks included in the SPDR S&P Bank ETF.
It's not the bank analysts who see the biggest profit growth.
What is the Bank's Earnings Growth of 100%?
Analysts say that banks are not usually known for their explosive profits growth. However, some have broken the mold this first quarter.
BOK Financial is a commercial and consumer holding company based in Tusla, Okla. When it announces its first-quarter profits on April 26, the company is expected make $2.31 per share. If the analysts are correct, that would be a growth of 153%. Overdraft fees and mortgage origination fees allow the bank to compensate for weaknesses in certain areas of its business.
Stacy Kymes, CEO of BOK Financial, said in a conference call for investors during the fourth quarter that "our fee business remained strong throughout the quarter and the year despite the worst equity and fixed income market since the late 1960s." BOK Financial shares are down by 20% so far this year.
First Interstate is another option. Stocks are down by more than 23% in this year. Analysts predict that the company will earn 80 cents per share in the first three months of the year, a 133% increase from the previous period.
Of course, the bigger banks are also of interest. Kenneth Leon is CFRA Research's research director and bank analyst. He said that JPMorgan and WFC are the most likely to achieve (higher) profits.
Investors will be reassured by even a few good financial news stories.
Leon stated that "last month saw historic news for the U.S. Banking Industry." Financial stability and confidence in the banking system are paramount for all - including the Federal Reserve Bank, corporations, and consumers.
Bank Earnings Bonanza
The SPDR S&P Bank ETF is expected to have the highest first-quarter profits among all ETFs.
Trustmark (TRMK), 42.6% -30.4%, 4/25/2023
Sources: S&P Global Market Intelligence, IBD, SPDR S&P Bank