Big banks will be among the first group of publicly traded companies to publicise fourth-quarter earnings in January 2022, and there may be some surprises. The COVID-19 Omicron variant emerged smack in the middle of the quarter and threw everything we thought we could expect into chaos.
Let’s take a closer look at why it is crucial to be aware of when major financial institutions report their earnings, and how they can affect your investments.
Big banks mean big money
A bank is no longer just a place for storing your money — banks offer a variety of financial services such as investments, insurance, and credit cards, in addition to traditional financial services, playing a central role in the economy. Therefore, their earnings will not only tell investors how the banks have performed over the last quarter, but also give a wider indication of how the economy is doing.
Why are earnings important?
Earnings reports are released by publicly traded companies every three months and provide investors with important information, such as profit after expenses, earnings per share, and the company’s current financial resources. These figures can help analysts and investors assess the company’s performance and whether or not their stock can be considered a good investment.
If you own stock in a company, or are considering it, you want to hear how the company expects to perform in the coming year. Does the company see itself facing risks? Growth opportunities? Special advantages it might have in the near future? This information can directly affect the stock’s price, since they influence investors’ sentiment — their feeling of where the company is going and if it is worth owning a part of it.
When and who to watch for
On Friday, January 14th, there are four major banks reporting earnings before the market opens.
- JPMorgan Chase: market cap $495 billion
- Wells Fargo: market cap $210 billion
- BlackRock: market cap $139 billion
- Citigroup: market cap $127 billion
On Tuesday, January 18th
- Charles Schwab Group: market cap $162 billion
- Goldman Sachs Group: market cap $136 billion
On Wednesday, January 19th
- Bank of America Corp: market cap $392 billion
- Morgan Stanley: market cap $187 billion
Investors are banking on earnings
An investor’s perspective on earnings can vary according to their goals and portfolio strategy:
- Short-term investors: If quarterly earnings meet analysts’ expectations, stock prices will remain steady. However, if earnings exceed expectations, stock prices will likely jump, and if below expectations, stock prices will likely fall. Short-term traders will follow this closely in the hope of capitalising on these reports.
- Long-term investors: These reports provide an indication of how the company is doing and where it sees itself in the near future. For long-term investors, it is a great interim update.
If you belong to the latter category of long-term investors, another option you might consider is diversified exposure to the financial sector rather than just one or two banks. eToro’s TheBigBanks Smart Portfolio offers investors a ready-made portfolio with no management fees and no hidden charges, composed of finance industry leaders, including major banks, investment houses and other financial institutions.
The first earnings season of 2022
The Omicron variant completely changed the fourth-quarter trajectory of 2021. Whether you are a short-term or long-term investor, you will want to keep an eye on market news as the earnings report dates get closer.
This communication is for information and education purposes only and should not be taken as investment advice, a personal recommendation, or an offer of, or solicitation to buy or sell, any financial instruments. This material has been prepared without taking into account any particular recipient’s investment objectives or financial situation, and has not been prepared in accordance with the legal and regulatory requirements to promote independent research. Any references to past or future performance of a financial instrument, index or a packaged investment product are not, and should not be taken as, a reliable indicator of future results. eToro makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication.