These Bank Stocks Hit Highs As Goldman Sachs, Charles Schwab Post Hot Earnings

Topline

Bank stocks surged Tuesday as several major financial institutions reported earnings, as the group gets a boost from lower interest rates.

Key Facts

Five of the eight largest U.S. banks by market capitalization reported third-quarter results Tuesday – Bank of America, Charles Schwab, Citigroup and Goldman Sachs – with the most notable metrics including 18% or better annual revenue jumps from Bank of America, Citi and Goldman’s equities trading divisions and shrinking debt from Schwab.

The investor response was overwhelmingly positive to the batch of earnings, with Bank of America shares gaining 3% at open, Citi rising 1.7%, Schwab shares soaring 7% (on pace for its best day since July 2023), Goldman 3% and PNC 1%, though Citi and Goldman turned negative as trading continued.

National banks Goldman and Morgan Stanley tallied all-time high intraday share prices Tuesday and a host of regional stocks like Bank of New York Mellon, PNC, U.S. Bancorp stocks registered 52-week highs, while other financial services firms like American Express and BlackRock also touched records.

The S&P 500’s financials sector rose 0.8%, the third-largest gain of any of the index’s 13 sectors, while the BlackRock-managed iShares U.S. Financials exchange-traded fund also gained 0.8%, notching an all-time high.

Key Background

The iShares financials ETF is up 4% since last Thursday, as the U.S.’ largest and third-largest banks JPMorgan Chase and Wells Fargo reported bumper earnings Friday. It’s not just strong Q3 results driving the bank stock rally, but rather a “macro rotation,” noted Deutsche Bank analyst Matt O’Connor in a Friday note to clients. O’Connor added the market’s increased confidence that the U.S. avoided a recession is the “best outcome for banks.” That’s because investment banks get major boosts from better economic sentiment and declining rates as companies pursue mergers and acquisitions, initial public offerings, and other financing routes that require financial advisory services. The Federal Reserve cut interest rates last month for the first time in more than four years, and is widely expected to continue lowering rates. Last year was the weakest for M&A globally since 2013, according to McKinsey & Company. Though it’s been a strong stretch for national banks, many regional bank stocks have struggled to return to glory after 2023 marked the worst year for bank failures in U.S. history as regional powerhouses First Republic, Signature and Silicon Valley Banks went under in a seven-week stretch. The SPDR S&P Regional Banking ETF is down more than 20% since the end of 2021.