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Banks (Finance)

US Banks' Strong Q4 Earnings May Be a Momentary Blip

Strategic Insights

— 2 min read

The S&P 500 Financials index has risen more than 25% since late October, driven by a 21.5% increase in fourth-quarter earnings for the country's six biggest banks. However, the sector's growth may be tempered by a difficult interest rate environment, potential tighter regulations, and a slow rollout of the Pfizer and Moderna vaccines.

Key Takeaways:

  • The six biggest US banks - JPMorgan Chase, Citigroup, Bank of America, Goldman Sachs, Morgan Stanley, and Wells Fargo - generated $32.6 billion in net income for the three months ending in December, a 21.5% increase from the previous quarter.
  • The S&P 500 Financials index has risen more than 25% since late October, outpacing the 16% advance of the S&P 500 itself.
  • The sector's growth may be hindered by a difficult interest rate environment, with the difference between one-month Treasury bills and benchmark 10-year notes standing at less than 1%.
  • The Federal Reserve has pledged to keep up both the pace and quantity of its bond purchases, taking around $120 billion from the market each month.
  • Questions surrounding the fate of President Joe Biden's $1.9 trillion stimulus plan, as well as potential tighter regulations, may also hold back gains for the sector.
  • A slow rollout of the Pfizer and Moderna vaccines is limiting a broader economic recovery and the re-opening of thousands of shuttered businesses.

Statistics:

  • The S&P 500 Financials index has risen more than 25% since late October.
  • The six biggest US banks generated $32.6 billion in net income for the three months ending in December.
  • The difference between one-month Treasury bills and benchmark 10-year notes stands at less than 1%.
  • The Federal Reserve pledges to take around $120 billion from the market each month through bond purchases.
  • Only 4.3 million people in the US have received two shots of either the Moderna or Pfizer vaccine, as of Jan. 28.

Sources:

  • The Streeet: U.S. banks have been one of the top-performing stock sectors in the wake of President Joe Biden's election victory in November
  • The Streeet: Fed Leaves Rates Unchanged, Says Pandemic Poses Considerable Risks
  • The Streeet: $2 Trillion Biden Stimulus Plan Includes Raising Checks to $2,000
  • The Streeet: Reg BI Fails to Protect Borrowers, Says Maxine Waters, House Democrat
  • The Streeet: JPMorgan's Jamie Dimon Sees a 'Very Healthy' Domestic Economy in the Second Half of the Year
  • CDC: COVID-19 Vaccination Data as of Jan. 28

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