Banking stocks recently saw a stunning rally on hopes of economic stabilization and attractive valuations, helping the S&P 500 banks industry group index grow 40% in the last three months alone.
However, the soft fourth-quarter earnings reports from big banking giants have halted the upside momentum as the industry group index fell more than 3% on Friday and extended the downtrend into the new week.
The losses came after Wells Fargo reported lower than expected results for the fourth quarter and guided a soft outlook for 2021. Moreover, the bank failed to reduce expenses according to previous guidelines. Wells Fargo stock was among the biggest loser, with a drop of 7.8% on Friday.
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The bank anticipates it’s fiscal 2021 net interest income to decline in the range of 4% from the previous year, while its overall expenses are likely to hit the $57.6 billion levels compared to $54 billion in 2020. The updated NII and expense guidance implies significant downward revisions to forward estimates.
Citigroup (NYSE: C) shares tumbled more than 4% as FICC (fixed income, commodities, and currencies) sales and trading revenue declined significantly from consensus estimates.
Its fourth-quarter revenue dropped more than 10% from the prior-year period and fell short of the estimate by $210 million. Its net credit losses came in at $1.47 billion, down from $1.92 billion in the previous quarter.
JPMorgan impresses but shows concerns over Fintech
Although JPMorgan’s (NYSE: JPM) stock price fell close to 2%, the banking giant still managed to impress investors both on revenue trends and bottom-line.
Despite that, chief executive officer Jamie Dimon has been showing concerns over rising competition from fintech companies. He said the bank is scared of rising fintech competition.
“We’ve just got to get quicker, better, faster… As you look at what we’ve done, you’d say we’ve done a good job, but the other people have done a good job, too,” he added.
