Wall Street’s biggest financial institutions launch fourth-quarter earnings on Wednesday, with portfolio names Wells Fargo, Goldman Sachs and BlackRock set to report results before the opening bell. The rally in financial stocks last year, which actually began in October 2023, went into high gear on the eve of the Federal Reserve kicking off a cycle of monetary easing with a big 50 basis point interest rate cut in the gathering of of September. It rose in early November after Republican Donald Trump emerged as the winner of the presidential race and the Fed cut rates by 25 basis points. After the December meeting, the Fed cut rates by 25 basis points and forecast two more cuts in 2025. Bank stocks, like the broader market, have come off the boil in the new year as traders pushed up bond yields, signaling that they think the Fed may have been too hawkish with its rate cuts. While the incoming Trump administration’s stance on regulations 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 proved more resilient than expected, raising concerns about sustained inflation. That’s why the market, according to the CME FedWatch tool, sees only one rate cut or perhaps none this year. Against this 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 Mountain YTD Performance Wells Fargo (WFC) Year-To-Date 1. What is Wells Fargo’s guidance on net interest income? Wells Fargo’s guidance on net interest income (NII) — “the difference between what the firm makes on loans and what it pays on deposits —” will be crucial. Interest-based income for Wells took a hit last year after the Fed kept rates higher for longer. Not only did this affect credit growth, but customers decided to move their deposit money to higher yielding alternatives. Despite the Fed’s rate cut, those higher-yielding alternatives are still competing with deposits. The company has taken action, but we’ll have to see how management deals with those higher funding costs. The NII is expected to decline about 1% year over year in 2025 based on FactSet consensus estimates. 2. Will management continue to diversify revenue streams? We’ve praised Wells Fargo’s push into investment banking and other ways of collecting fee-based revenue streams. In recent years, the firm has made a number of high-level hires 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 those efforts paid off as revenue from its investment banking division beat analysts’ expectations. An expected easing of regulations by the Trump administration is seen as a positive for deal-making and initial public offerings (IPOs), which the IB operations at Wells Fargo and Goldman Sachs help put together and receive advisory fees. 3. Is there any further progress on the regulatory front? Wells Fargo executives are unlikely to reveal much, but analysts are likely to ask about the steps Wells Fargo and CEO Charlie Scharf have taken to appease regulators. Scharf has cleaned up the bank’s act in hopes of removing the $1.95 trillion asset limit the Fed placed on Wells Fargo. He was convicted in 2018 of past misdemeanors that preceded Scharf. Any indication of progress in lifting the asset limit 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 thriving but profitable business lines such as investment banking. Based on recent reports, there is a belief that the asset limit could be lifted as early as the first half of this year. 4. How does the bank’s expense guide measure up? We want to make sure that management’s steps to reduce costs are still being made. When Scharf took over as CEO in 2019, Wells Fargo had one of the most inflated expense bases of any major bank. Since then, Scharf has been cutting costs left and right. We want to see more progress in the fourth quarter as well. Operating expenses are expected to be flat year over year to slightly higher year over year in 2025, based on FactSet consensus estimates. Goldman Sachs ( GS ) mountain YTD YTD performance year-to-date 5. How is the state of Wall Street deals? We have long been a Goldman Sachs stock because it is an excellent return on investment banking. In fact, it’s so good that the Club left Morgan Stanley entirely this month and put the money into starting and building a position in Goldman, a stop in Jim’s career on the Street. Therefore, comments from Goldman management about appetite for IPOs, mergers and acquisitions, and other types of deals are key during the conference call. That’s because more deals mean more revenue for Goldman’s IB division, which accounted for a significant portion of overall revenue last quarter. We’ve already seen an uptick in M&A, and some of those deals probably never would have come together without a regime change in Washington. 6. What happens to Goldman’s interest in the private loan? The Wall Street Journal reported Monday that Goldman has plans to restructure itself to begin facilitating different types of financing deals. This will be the first quarter we hear directly from management about it. BLK Mountain BlackRock (BLK) YTD Performance Year-to-date 7. What are BlackRock’s New Net Assets? It will be the first quarter BlackRock reports as a portfolio stock since it was added in late 2024. Net flows 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 firm accumulates, the more fees it can generate. If management stays disciplined on costs from there, it should help improve BlackRock’s financial performance. 8. What are the firm’s operating margins? This is another important metric for investors to watch because it measures how much profit BlackRock is generating from its core businesses before interest and taxes. A higher operating margin usually suggests that a company is more efficient at generating profits. Plus, this figure can also give investors an insight into how BlackRock is managing its expenses. 9. How is BlackRock’s strategic push going? The asset manager has made a number of acquisitions over the past year to increase its presence in fast-growing segments such as infrastructure and private credit. Most recently, it completed a $12.5 billion deal to acquire Global Infrastructure Partners to create a world-leading infrastructure private markets investment platform. It is paying $3.2 billion to buy a private markets data provider called Preqin. BlackRock recently boosted private equity with a $12 billion acquisition of HPS Investment Partners. We want to know how all these deals are progressing because they are key to the company’s goal of becoming a larger alternative manager. (Jim Cramer’s Charitable Trust is long BLK, WFC, GS. See here for a full list of stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you’ll receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a share in his charitable trust portfolio. 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Wells Fargo, Blackrock and Goldman Sachs.
Jeenah Moon | Reuters | Justin Sullivan | Michael M. Santiago | Getty Images
Wall Street’s biggest financial institutions kick off fourth-quarter earnings Wednesday, with portfolio names Wells Fargo, Goldman SachsAND BlackRock set to report the results before the opening bell.
