Wall Street’s biggest financial institutions will report fourth-quarter results on Wednesday, with portfolio names Wells Fargo, Goldman Sachs and BlackRock expected to report results before the opening bell. Last year’s rally in financial stocks actually began in October 2023, when the Federal Reserve cut interest rates by a whopping 50 basis points (bp) at its September meeting, ushering in a monetary easing cycle. The preparations were in full swing. Interest rates were raised significantly in early November after Republican Donald Trump won the presidential election and the Fed cut rates by another 25 basis points. After its December meeting, the Fed cut rates another 25 basis points and predicted two more cuts in 2025. Bank stocks, like the broader market, came out of the boil in the new year as traders pushed up bond yields. The Fed may be too aggressive in cutting interest rates. Although the incoming Trump administration’s approach to regulation is seen as more pro-business, some of the policies the president-elect proposes, particularly regarding trade tariffs, could be inflationary. The labor market has also proven more resilient than expected, raising concerns about the persistence of inflation. That’s why the market may see only one rate cut this year, or no rate cut at all, according to the CME FedWatch tool. Against this backdrop, there are still separate factors to consider when Wells Fargo, Goldman Sachs and BlackRock report their quarters. We are looking for answers to nine questions. WFC YTD Mountain Wells Fargo (WFC) Year-to-date Performance 1. What is the guidance for Wells Fargo’s net interest income?Wells Fargo’s net interest income (NII), or the amount the company earns on loans; Guidance on the difference in amounts paid on deposits will be extremely important. Wells’ interest income took a hit last year as the Fed raised interest rates for an extended period of time. This not only weighed on loan growth, but customers decided to move their deposit funds to higher-yielding alternatives. Despite the Fed’s interest rate cuts, these high-yield financial alternatives still compete with deposits. The company has taken steps, but it remains to be seen how management will deal with these higher financing costs. Based on FactSet consensus estimates, NII is expected to decline by approximately 1% year over year in 2025. 2. Will management continue to diversify its revenue streams?We’ve admired Wells Fargo’s expansion into investment banking and other ways to earn fee-based revenue streams. In recent years, the company has made a number of senior-level hires to expand its IB efforts. This is a way for Mr. Wells to become less reliant on interest-based income like NII, which is dependent on Fed policy decisions. Over time, these fee-based revenues can also become a more profitable source of revenue. Those efforts paid off last quarter, when the investment banking division’s revenue exceeded analysts’ expectations. Expected deregulation by the Trump administration is expected to be a boon for dealmaking and initial public offerings (IPOs), where Wells Fargo and Goldman Sachs’ IB operations are consolidated and help pay advisory fees. There is. 3. Will there be further developments on the regulatory front? Wells Fargo executives are unlikely to reveal much, but analysts believe Wells Fargo and CEO Charlie Scharf are likely to become regulators. They are likely to ask questions about the steps they have taken to appease them. Mr. Scharf has been cracking down on bank fraud in hopes of lifting the $1.95 trillion asset cap the Fed imposed on Wells Fargo. It was installed in 2018 due to past misconduct before Schaaf. Any sign of progress towards lifting the asset cap would be welcome news for shareholders like us. That’s because removing the cap would allow Wells to expand its balance sheet and invest more in up-and-coming but profitable lines of business, such as investment banking. Recent reports suggest that the asset cap could be lifted as early as the first half of this year. 4. How is the bank’s expense guide calculated?We want to see that management’s efforts to reduce expenses continue. When Mr. Scharf took over as CEO in 2019, Wells Fargo had one of the most inflated expense bases of any major bank. Since then, Schaaf has continued to cut costs radically. We hope to see further progress in the fourth quarter. Based on FactSet consensus forecasts, operating expenses are expected to be flat to slightly higher in 2025 year-over-year. GS YTD Mountain Goldman Sachs (GS) Year-to-date Performance 5. How is Wall Street trading?We’re long Goldman Sachs stock because Because it’s a great recovery story for the investment banking industry. In fact, the club even exited Morgan Stanley altogether this month and poured money into building and launching a position at Goldman, which ended Jim’s street career. Therefore, what Goldman management says about its appetite for IPOs, mergers and acquisitions, and other types of transactions will be important on the conference call. That’s because more trading means more revenue for Goldman’s IB division, which accounted for a significant portion of last quarter’s overall revenue. We are already seeing an increase in M&A, and some of those deals likely would never have been completed without a regime change in Washington. 6. What’s going on with Goldman’s interest in private credit? The Wall Street Journal reported Monday that Goldman is planning a reorganization to further facilitate different types of lending transactions. Reported. This is the first quarter we’ve heard directly from management about this. BLK YTD Mountain BlackRock (BLK) Year-to-date Performance 7. What is BlackRock’s net new assets?This is the first time BlackRock has been reported as a portfolio stock since its addition at the end of 2024. It will be a quarter. Net inflows will be a key metric to watch for the world’s largest asset manager. BlackRock reported assets under management (AUM) of $11.48 trillion last quarter, an all-time high, up from $10.65 trillion the previous quarter. The more assets a company scrapes together, the more fees it can incur. From there, if management can maintain cost discipline, it could help improve BlackRock’s financial performance. 8. What is the company’s operating profit margin? This is another one investors should look at because it measures how much profit BlackRock generates from its core business before interest and taxes. This is an important indicator. A high operating profit margin usually indicates that a company is efficient in generating profits. Additionally, the numbers also give investors a read on how BlackRock is managing its expenses. 9. What is BlackRock’s strategic push?The asset manager has made a number of acquisitions over the past year to increase its presence in high-growth areas such as infrastructure and private credit. The company recently completed a $12.5 billion deal to acquire global infrastructure partners to build the world’s leading infrastructure private market investment platform. It is paying $3.2 billion to acquire a private market data provider called Preqin. Most recently, BlackRock strengthened its private credit with the $12 billion acquisition of HPS Investment Partners. We want to know how all these deals are going. Because these deals are key to the company’s goal of becoming a larger alternative operator. (Jim Cramer’s Charitable Trust is long BLK, WFC, and GS. 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Wells Fargo, BlackRock, Goldman Sachs.
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Wall Street’s biggest financial institutions will report fourth-quarter results on Wednesday, with portfolio names Wells Fargo, Goldman Sachs and BlackRock expected to report results before the opening bell.
