Big banks will start releasing their quarterly numbers from next week. Let’s delve into the earnings potential of the big six banking companies, which could drive the performance of the sector ahead.
According to our methodology, a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) when combined with a positive Earnings ESP, increases the chances of predicting an earnings beat, while companies with a Zacks Rank #4 or 5 (Sell rated) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Inside Our Surprise Prediction
Among the big six, JPMorgan Chase & Co. JPM, Wells Fargo & Company WFC, and Citigroup Inc. C are expected to report earnings on April 14. Bank of America Corporation BAC and Morgan Stanley MS are likely to report on April 15. The Goldman Sachs Group GS is expected to come up with earnings results on April 13.
GS has a Zacks Rank #3 and an ESP of +1.48%.
JPM has a Zacks Rank #3 and an Earnings ESP of +0.52%.
C has a Zacks Rank #3 and an ESP of +0.25%.
WFC has a Zacks Rank #3 and an ESP of negative 0.14%.
BAC has a Zacks Rank #3 and an Earnings ESP of +1.00%.
MS has a Zacks Rank #3 and an Earnings ESP of 0.00%.
Are Positive ESPs Good for Financial ETFs?
As discussed above, chances of a broad-based earnings beat are moderate-to-high as most stocks are experiencing a positive ESP. We do not expect bearish earnings results from big banks, as capital market activities should be upbeat.
Interest income and investment banking revenues should be strong, per Reuters. However, rising geopolitical risks due to the Iran war add to uncertainty. Deal-making has been solid thanks to large mergers and acquisitions.
About two dozen mega deals worth over $10 billion were reached globally, along with 40 deals valued at over $5 billion, according to LSEG data, per the same Reuters article.
Can Chances of Upbeat Earnings Boost Ailing Financial ETFs?
State Street Financial Sel Sec SPDR ETF XLF has lost about 6.8% so far this year (as of April 8, 2026). Vanguard Financials Index Fund ETF VFH also fell about 6.3%. Over the war-laden past month, XLF and VFH have added 1.7% and 2.2%, respectively. Over the past week, both funds have advanced about 2.8% and 3.1%, respectively.
Chances of a steeper yield curve post the Fed comments on a controlled inflationary scenario in the United States have probably favored the financial funds in recent weeks. A steeper yield curve favors banks’ net interest margins. Against this backdrop, the probability of upbeat earnings should be beneficial for the related ETFs.
Bottom Line
So, whatever the earnings surprise is, investors can play these financial ETFs on the basis of yield curve movement. Hence, investors pinning hopes on a bank rally should track financial ETFs like iShares U.S. Financial Services ETF IYG, iShares US Financials ETF IYF, Invesco KBW Bank ETF KBWB, XLF and VFH. These funds have considerable exposure to the aforementioned stocks.
Goldman has moderate exposure in the aforementioned ETFs. It is heavy on iShares U.S. Broker-Dealers & Securities Exchanges ETF IAI.
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The Goldman Sachs Group, Inc. (GS): Free Stock Analysis Report
Bank of America Corporation (BAC): Free Stock Analysis Report
Wells Fargo & Company (WFC): Free Stock Analysis Report
JPMorgan Chase & Co. (JPM): Free Stock Analysis Report
Morgan Stanley (MS): Free Stock Analysis Report
Citigroup Inc. (C): Free Stock Analysis Report
State Street Financial Select Sector SPDR ETF (XLF): ETF Research Reports
Invesco KBW Bank ETF (KBWB): ETF Research Reports
iShares U.S. Financial Services ETF (IYG): ETF Research Reports
Vanguard Financials Index Fund ETF Shares (VFH): ETF Research Reports
iShares U.S. Financials ETF (IYF): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).