Big Banks Fail to Impress Despite Earnings Beat

Shares of JPMorgan Chase & Co. (JPM

), Citigroup Inc. (C) and Wells Fargo Corp. (WFC) all saw a significant dip Friday despite posting earnings results that beat consensus estimates for both top and bottom line numbers. Shares of JPM closed down 2.7% while WFC sank 3.4% and C fell 1.6%. Meanwhile, the Street has continued to highlight financials’ strength in 2018 as they benefit from factors including rising interest rates, looser regulation and a refocus on tech titans, tax-cut-fueled stock buybacks and a relative immunity from rising global trade tensions. In Q1, analysts expected the S&P 500 to show profit gains of 17% year-over-year (YOY), while banks were projected to jump 28%. (See also: 10 Financial Stocks Poised to Outperform.)

The sell-off suggests that banks failed to meet lofty targets demonstrated by investors confidence in financials over the past five years, driving the sector up 90% over that time and accelerating gains in the past year. Rising rates, which were expected to provide a strong boost to banks, worked to increase interest income 10% for JPM and C in Q1, yet interest expenses were up in the 50% range. Despite historically low levels of unemployment and a strong economy, loan growth was lackluster, as JPM’s lending business slumped 0.2% from the previous three quarters, WFC loans slumped 1% and Citigroup’s lending gained…

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