As earnings season approaches, many are betting big on banks


The first quarter ended last week and, among other things, that means another earnings season will start soon. It also means that, as usual, financial services stocks will get the ball rolling, putting the Invesco KBW Bank ETF (NASDAQ: KBWB) on point.

KBWB tracks the widely followed KBW Nasdaq banking index.

“The Index is a modified market capitalization weighted index of companies primarily engaged in banking activities in the United States. The index is compiled, maintained and calculated by Keefe, Bruyette & Woods, Inc. and Nasdaq, Inc. and is composed of major US money centers, regional banks and listed savings institutions in the United States ” , according to Invesco.

Investors may want to brace for some nice KBWB gains this earnings season.

Matt O’Connor, analyst at Deutsche Bank, “sees earnings per share increase by up to 20% in 2023 and 2024 and stocks gain up to 50% in the next two to three years. Banks will continue to benefit from the things that have helped them this year, but O’Connor also expects loan growth to drive second half results as the economy is even stronger, ”Carleton reports. English for Barron.

Profits, fund components, loan loss reserves, etc.

Up 24.91% year-to-date, KBWB is benefiting from the value rotation – a move market watchers believe has the potential to last a bit longer. Strong earnings can add to the medium-term arguments for KBWB, as can rising interest rates.

Deutsche Bank’s O’Connor “went on to note that a 10% jump in loan growth adds about 8% to bank profits. The industry generally needs a one percentage point increase in interest rates to see a similar impact on earnings, ”according to that of Barron.

KBWB contains the who’s-who of financial players in the national economy, including JP Morgan, Wells Fargo and many more. This makes it an ideal game on the American financial world.

“Goldman Sachs also issued a bullish note on the sector. While the big banks are expected to release their results next week, Goldman Sachs analysts have said they expect executives to adopt an optimistic tone for this year and next, ”added Barron.

Finally, other KBWB catalysts include buyouts and dividend growth later this year and banks releasing their loan loss reserves as the economy improves.

Total KBWB return over 3 years

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The opinions and forecasts expressed herein are solely those of Tom Lydon and may not come to fruition. The information on this site should not be used or interpreted as an offer to sell, a solicitation of an offer to buy or a recommendation for any product.

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