Group 1: Earnings Outlook for Banks - The earnings outlook for major banks like JPMorgan, Wells Fargo, and Citigroup is improving, with these banks having passed the Fed's stress tests, allowing for increased capital returns through share buybacks and dividend hikes [2][3] - Q2 earnings growth for these banks is expected to be flat, with JPMorgan's earnings projected to decline by -5.4% and revenues by -13.3%, while Citigroup and Wells Fargo are expected to see declines of -3.8% and -7%, respectively [4] - Despite the subdued Q2 outlook, there is a trend of rising earnings estimates for the second half of the year, with 2026 EPS estimates for JPMorgan, Wells Fargo, and Citigroup increasing by +2%, +1.5%, and +1.1% over the past month [5] Group 2: Overall Finance Sector Performance - The Zacks Investment Brokers & Managers industry, which includes the aforementioned banks, is expected to see Q2 earnings down -2.8% year-over-year, with revenues down -0.5% [6] - The broader Zacks Finance sector is projected to have Q2 earnings up +8.2% on +3.9% higher revenues, indicating a mixed performance within the sector [6] - Total S&P 500 earnings for the June quarter are expected to increase by +4.7% year-over-year, with the Tech and Finance sectors being the largest contributors, accounting for 51% of all index earnings [7][17] Group 3: Market Performance and Future Expectations - Despite the weak earnings growth expectations for banks, these stocks have performed well in the market, reflecting improved expectations for capital returns and future earnings growth [8] - The banking industry and the broader Finance sector are anticipated to be significant contributors to aggregate earnings growth moving forward [10] - The market's recovery from the post-tariff lows suggests that participants may not view tariff uncertainty as a significant threat, although there is skepticism regarding the long-term impact on earnings [26]
Finance Earnings Outlook Improves: A Closer Look