Banking Stocks Rally Halts on Q4 Results, Fintech Fight Heating Up

Lower than expected fourth-quarter results have reversed the banking stock bullish trend as lower interest income, credit losses, and the users’ move towards fintech platforms have negatively impacted their overall performance.

Shares of Wells Fargo (NYSE: WFC) plunged almost 8% after Q4 earnings. Wells Fargo missed revenue and net interest margin expectations while its soft guidance for the first quarter added to investors’ concerns. The bank also failed to impress investors with its cost-saving strategies. It posted $54 billion in expenses in 2020, with a forecast of $57.6 billion in 2021.

2021 Expense Expectations

What’s more, Wells Fargo is anticipating 2021 net interest income to fall at a low single-digit rate from the annualized Q4 2020 level.

Citigroup

CitiGroup (NYSE: C) stock price tumbled after it reported that its FICC (fixed income, commodities, and currencies) sales and trading revenue missed expectations. Its fourth-quarter revenue of $16.5 billion declined 10% year over year and missed analysts’ expectations by $210 million.

“The low-interest-rate regime has seen the net interest income of U.S. banks decline for four successive quarters,” Michael Gayed wrote. “Regardless, banks with more diversified revenue streams and fee-based income could fare relatively better than their peers.”

JPMorgan Gears up Fintech Fight

$JPM JP Morgan chase quote
JPMorgan (NYSE: JPM) was among the losers after earnings announcement, with a share price loss of 1.8%. However, JPM looks in a better position than Wells Fargo and CitiGroup. It topped analysts’ expectations both on revenue and earnings per share. Its fourth-quarter revenue of $30 billion increased by 3.4% from the past year period.

“Absolutely, we should be scared (expletive) about the threat of fintech,” JPM chief Jamie Dimon said in an earnings call. “We’ve just got to get quicker, better, faster… As you look at what we’ve done, you’d say we’ve done a good job, but the other people have done a good job, too,”

he added.

Siraj Sarwar - Lead Analyst
@tradethedayfx
Siraj Sarwar has been performing analysis on the stock market, equity research and general business consultation. He regularly contributes articles on economics, commodities, and equities to the world's leading websites, including Trade the Day, SeekingAlpha, TheStreet, and MSN.
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