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Wall Street’s largest financial institutions will kick off fourth-quarter results on Wednesday, with portfolio names Wells Fargo, Goldman Sachs and BlackRock set to report their results before the opening bell. Last year’s rally in financial stocks, which only started in earnest in October 2023, went into high gear ahead of the Federal Reserve kicking off a monetary easing cycle with a massive 50 basis point interest rate cut at its September meeting. In early November, rates got a boost after Republican Donald Trump emerged as the winner of the presidential race and the Fed cut rates by another 25 basis points. After the December meeting, the Fed cut rates by another 25 basis points and forecast two more cuts in 2025. Bank stocks, like the broader market, have come off the boil this new year as traders pushed up bond yields, signaling that they think the Fed may have been too heavy-handed with its rate cuts. While the new Trump administration’s stance on regulation is seen as more business-friendly, some of the president-elect’s proposed policies, especially when it comes to trade tariffs, could be inflationary. The labor market has also proven more resilient than expected, raising concerns about persistent inflation. That’s why, according to the CME FedWatch tool, the market sees only one, if any, rate cut this year. Against that backdrop, there are still individual 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 Wells Fargo’s guidance for net interest income? Wells Fargo’s guide to net interest income (NII) – the difference between what the company earns on loans and what it pays in deposits – will be critical. Interest-based earnings for Wells took a hit last year as the Fed kept rates high for longer. Not only did this weigh on loan growth, but customers also decided to move their deposit money into higher interest rate alternatives. Despite the Fed’s rate cuts, these higher-yield alternatives still compete with deposits. The company has taken action, but we will have to see how management deals with those higher financing costs. Based on FactSet consensus estimates, the NII is expected to decline about 1% year-over-year in 2025. 2. Will management continue to diversify revenue streams? We praised Wells Fargo’s commitment to investment banking and other ways to generate fee-based revenue streams. In recent years, the company has hired a slew of seniors to expand its IB efforts. It’s a way for Wells to not rely so heavily on interest-based income like NII, which is at the mercy of the Fed’s policy decisions. Over time, these fee-based revenues can also be higher-margin revenue streams. Last quarter, these efforts paid off as the investment banking division’s revenue exceeded analyst expectations. An expected relaxation of regulations by the Trump administration is seen as positive for dealmaking and initial public offerings (IPOs), which help build IB operations at Wells Fargo and Goldman Sachs and receive paid advisory fees. 3. Is there any further regulatory progress? Wells Fargo executives are unlikely to reveal too much, but analysts are likely to ask questions about the steps Wells Fargo and CEO Charlie Scharf have taken to appease regulators. Scharf has cleaned up the bank’s dealings in hopes of lifting the Fed’s $1.95 trillion asset cap on Wells Fargo. It was posted in 2018 due to past misdeeds that predated Scharf. Any indication of progress in eliminating the asset cap will be welcome news for shareholders like us. That’s because once the cap is gone, Wells will be able to grow its balance sheet and invest further in nascent but lucrative industries like investment banking. Based on recent reports, it is expected that the asset limit could be lifted as early as the first half of this year. 4. How does the bank’s expenditure guide score? We want to ensure that management’s moves to reduce costs are still happening. When Scharf took on the role of CEO in 2019, Wells Fargo had one of the most bloated spending bases of any major bank. Since then, Scharf has been cutting costs left and right. We also want to see more progress in the fourth quarter. Based on FactSet consensus estimates, operating costs are expected to remain flat year-over-year to slightly higher year-over-year in 2025. GS YTD berg Goldman Sachs (GS) year-to-date performance 5. What’s the status of dealmaking on Wall Street? We are long Goldman Sachs because it is a great rebound move for investment banking. It’s so good, in fact, that this month the Club left Morgan Stanley entirely and invested the money in starting and building a position at Goldman, putting a stop to Jim’s high street career. That’s why comments from Goldman management on interest in IPOs, mergers and acquisitions and other forms of dealmaking are critical during the conference call. That’s because more deals mean more revenue for Goldman’s IB division, which accounted for a significant portion of total revenue last quarter. We’ve already noticed an uptick in mergers and acquisitions, and some of those deals likely would never have happened without regime change in Washington. 6. What about Goldman’s interest in private credit? The Wall Street Journal reported Monday that Goldman plans to restructure itself to continue facilitating different types of financing deals. This will be the first quarter that we hear about this directly from management. BLK YTD mountain BlackRock (BLK) year-to-date performance 7. What are BlackRock’s net new assets? It will be the first quarter that BlackRock reports as a portfolio share since adding it in late 2024. Net inflows will be a key metric to watch for the world’s largest asset manager. BlackRock posted a record $11.48 trillion in assets under management (AUM) last quarter, up from $10.65 trillion in the previous quarter. The more assets the company brings in, the more fees it can generate. If management remains disciplined on costs from then on, it will help improve BlackRock’s financial performance. 8. What are the company’s operating margins? This is another important metric for investors to keep an eye on, because it measures how much profit BlackRock generates from its core businesses, before interest and taxes. A higher operating margin usually suggests that a company is more efficient at generating profits. Additionally, this figure can also give investors insight into how BlackRock manages its expenses. 9. How is BlackRock’s strategic push progressing? The asset manager has made a number of acquisitions in the past year to strengthen its presence in fast-growing segments such as infrastructure and private credit. It recently completed a $12.5 billion deal to acquire Global Infrastructure Partners to create a world-leading infrastructure investment platform for private markets. It will pay $3.2 billion to buy a private market data provider called Preqin. More recently, BlackRock tapped the private credit sector with a $12 billion acquisition of HPS Investment Partners. We want to know how all these deals are going because they are critical to the company’s goal of becoming a bigger alternative manager. (Jim Cramer’s Charitable Trust is long BLK, WFC, GS. See here for a full list of the stocks.) As a CNBC Investing Club subscriber with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charity’s portfolio. If Jim has talked about a stock on CNBC TV, he will wait 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, ALONG WITH OUR DISCLAIMER. No fiduciary obligation or duty exists nor is it created by your receipt of any information provided in connection with the Investment Club. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Wells Fargo, Blackrock and Goldman Sachs.
Jeenah Moon | Reuters | Justin Sullivan | Michael M Santiago | Getty Images
Wall Street’s largest financial institutions are kicking off their fourth-quarter earnings Wednesday with portfolio names Wells Fargo, Goldman SachsAnd BlackRock set to report results before the opening bell.
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