What banking crisis? For some banks, profits are booming.
Ten banks in the SPDR S&P Bank ETF (KBE), including BOK Financial, First Interstate BancSystem and WSFS Financial, are expected to post 40% or higher earnings per share growth in the first quarter, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
And these standouts are in stark contrast with the beleaguered banks where profits are expected to drop. Banks with strong earnings growth could help calm investors' nerves as banks start reporting their first-quarter results this week.
"Bank earnings typically set the stage for how the rest of earnings season plays out and bank CEO commentary will be particularly important over the next week, as investors continue to gauge the probability of an upcoming recession," said David Trainer, CEO of investment research firm New Constructs.
Banking On Bank Earnings
The stakes are high for bank earnings this quarter. Bank's reports will "set the stage" for investors trying to gauge the economy's health, Trainer says. That's not to mention financials account for 13% of the S&P 500, making it the third-most important sector.
Wells Fargo reported its results on April 14, along with JPMorgan Chase and PNC Financial. And what they say will help investors handicap the odds of recession. Additionally, the reports will point to how smaller banks are holding up compared with the larger ones.
JPMorgan Chase, the largest bank by market value, is posted 56% higher profit in the first quarter. That put it way ahead of the average 11.4% earnings growth expected from the roughly 100 bank stocks in the SPDR S&P Bank ETF.
But it's far from being the bank analysts see the most profit growth from.
100% Earnings Growth From Banks?
Banks aren't usually known for explosive profit growth, but some are breaking the mold in the first quarter, analysts say.
Take BOK Financial, a Tusla, Okla.-based commercial and consumer bank holding company. The company is expected to make $2.31 a share when it reports first-quarter profit on April 26. If analysts are right that would mark growth of 153%. The bank is able to offset weaknesses in some of it business with fees associated with overdrafts and mortgage origination.
"Our fee business has remained strong for the quarter and for the year, despite the worst combined equity and fixed income markets since the late 1960s," said BOK Financial CEO Stacy Kymes in the fourth-quarter conference call with investors. Shares of BOK Financial are still down 20% this year.
And then there's First Interstate. The company, founded in 1971, offers traditional banking accounts from its Billings, Mont. headquarters. It's stock, too, is down more than 23% this year. And yet, analysts think the company will make 80 cents a share in the first quarter, up 133% from the same year-ago period.
Certainly, bigger banks will be of high interest, too. "We think JPM and WFC have the best chance to deliver (higher) earnings," said Kenneth Leon, research director and banking analyst at CFRA Research
But just seeing some good news from the financial sector will go a long way to reassure investors.
"Last month has seen historic news events for the U.S. banking industry," Leon said. "Financial stability and confidence in our banking system is paramount for everyone – the Federal Reserve Bank, financial institutions, corporates, and consumers."
Bank Earnings Bonanza
Analysts' largest expected jumps in first-quarter profit among the SPDR S&P Bank ETF
| Company | Ticker | First-quarter earnings % ch. (estimate) | Year-to-date % ch. | Next earnings date |
|---|---|---|---|---|
| BOK Financial | 153.5% | -20.3% | 4/26/2023 | |
| First Interstate BancSystem | 133.4% | -23.0% | 4/26/2023 | |
| WSFS Financial | 93.6% | -17.7% | 4/24/2023 | |
| Cullen/Frost Bankers | 70.1% | -22.4% | 4/27/2023 | |
| Comerica | 65.5% | -36.3% | 4/20/2023 | |
| Washington Federal | 53.3% | -9.7% | n/a | |
| First Financial Bancorp. | 53.3% | -12.6% | 4/20/2023 | |
| F.N.B. | 49.6% | -12.3% | 4/19/2023 | |
| M&T Bank | 45.2% | -19.0% | 4/17/2023 | |
| Trustmark | 42.6% | -30.4% | 4/25/2023 |
Sources: S&P Global Market Intelligence, IBD, SPDR S&P Bank
Follow Matt Krantz on Twitter @mattkrantz
