Big Banks to Hit Earnings Season With High Hopes: ETFs in Focus
Wall Street's biggest banks are heading into second-quarter earnings season with investor expectations running high. Strong trading activity, resilient consumer spending, healthy loan demand, good capital market activity and a pickup in artificial intelligence (AI)-driven capital markets activity have fueled optimism.
However, after a powerful rally in bank stocks this year, investors are increasingly questioning whether much of the good news has already been priced in. State Street SPDR S&P Bank ETFKBE is up 12.4% this year, outpacing State Street SPDR S&P 500 ETF TrustSPY (up 10.5% year to date).
The upcoming earnings reports could determine whether the banking sector has further upside or whether expectations have become too optimistic.
Inside Our Surprise Prediction
According to our methodology, a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) when combined with a positive Earnings ESP, increases the chances of an earnings beat, while companies with a Zacks Rank #4 or 5 (Sell rated) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Among the big six, Goldman Sachs Group GS, JPMorgan Chase & Co. JPM, Wells Fargo & Company WFC , Bank of America Corporation BAC and Citigroup Inc. (C) will report earnings on July 14. Morgan Stanley MS will report on July 15.
GS has a Zacks Rank #2 and an ESP of 0.00%.
JPM has a Zacks Rank #2 and an Earnings ESP of +0.49%.
WFC has a Zacks Rank #3 and an Earnings ESP of -0.36%.
BAC has a Zacks Rank #3 and an Earnings ESP of +0.64%.
C has a Zacks Rank #3 and an Earnings ESP of +0.64%.
MS has a Zacks Rank #3 and an Earnings ESP of +0.86%.
Are Positive ESPs Good for Financial ETFs?
As discussed above, chances of a broad-based earnings beat are high as majority of stocks have a positive ESP. We do not expect bearish earnings results from big banks, as big banks have benefited from a revival in capital markets activity supported by AI-related investment themes, robust merger and acquisition activity, and improving equity and debt issuance.
Analysts also expect major banks to deliver one of their strongest trading quarters of the decade, second only to the record performance posted in the first quarter, per Bloomberg data, as quoted on Yahoo Finance.
Inside Earnings & Revenue Growth Expectations
Below, we mention the Zacks Consensus Estimate for second-quarter earnings per share (EPS) and revenues of the big six banks (as of July 10, 2026).
JPM: EPS of $5.59 (up 12.70% year over year) on revenues of $48.71 billion (up 8.45% year over year)
WFC: EPS of $1.73 (up 12.34% year over year) on revenues of $21.80 billion (up 4.71% year over year)
C: EPS of $2.72 (up 38.78% year over year) on revenues of $23.68 billion (up 9.28% year over year)
BAC: EPS of $1.13 (up 26.97% year over year) on revenues of $30.62 billion (up 15.69% year over year)
GS: EPS of $14.47 (up 32.63% year over year) on revenues of $16.49 billion (up 13.10% year over year)
MS: EPS of $2.89 (up 35.68% year over year) on revenues of $19.38 billion (up 15.43% year over year)
Investors Wonder if This Is "Peak Bank"
Despite the upbeat outlook, many investors remain cautious after the sector's impressive rally.
UBS analyst Erica Najarian noted earlier this month that investors are "naturally skeptical," adding that "it's been awhile since it's felt like 'peak bank,’ as quoted on Yahoo Finance.
HSBC analyst Saul Martinez believes the industry's fundamentals remain healthy but expects the quarter to reinforce, rather than significantly improve, current market expectations, the same Yahoo source revealed.
Credit Quality Remains Healthy
Earlier concerns about banks' exposure to private credit markets have eased. NSBC analyst Martinez described overall credit conditions as "benign," suggesting there are few signs of deterioration in loan quality despite elevated interest rates and ongoing economic uncertainty, per the same Yahoo Finance article.
Following the Federal Reserve's annual stress tests in late June, many large banks also announced higher dividends and expanded share repurchase programs, reinforcing confidence in their capital strength.
Consumer Spending Continues to Support Growth
Another important pillar supporting the banking sector is the resilience of the U.S. consumer. The Bank of America Institute reported that card spending increased 6.3% year over year in June, marking the strongest annual growth in more than four years, as mentioned in the same Yahoo Finance article.
Bottom Line
The likelihood of positive earnings surprise and still-stable economic factors strengthen the case for investing in financial ETFs. Continued strength in lending, trading and investment banking activities has been a key positive for the sector so far.
Hence, investors pinning hopes on a bank rally should track financial ETFs like iShares U.S. Financial Services ETF IYG, iShares US Financials ETF IYF, State Street Financial Sel Sec SPDR ETF XLF and Vanguard Financials Index Fund ETF SharesVFH. These funds have considerable exposure to the aforementioned stocks.
The aforementioned ETFs have moderate exposure to Goldman. iShares U.S. Broker-Dealers & Securities Exchanges ETF IAI has significant exposure to the stock.
However, while the near-term backdrop remains favorable, higher energy prices, elevated AI valuations, sticky inflation, the possibility of a hawkish Fed, a flatter yield curve and signs of a weakening labor market could weigh on lending and investment banking activity.
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