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Strong Earnings Weren’t Enough for Bank ETFs

This article was originally published on ETFTrends.com.

Bank stocks and sector-related bank ETFs plunged on Friday, despite strong third quarter profit results.

Among the worst performing ETFs on Friday, the iShares U.S. Regional Banks ETF (IAT) declined 3.6%, SPDR S&P Regional Banking ETF (KRE) retreated 3.6%, PowerShares KBW Regional Bank Portfolio (KBWR) decreased 3.5%. Meanwhile, the broader Financial Select Sector SPDR (NYSEArca: XLF) fell 0.9%.

J.P. Morgan Chase (JPM) , Citigroup (NYSE: C) , Wells Fargo (WFC) and PNC Financial Services (PNC) all revealed strong quarterly results on Friday, but the markets did not appear impressed.

"There were some concerns that interest margins would start to deteriorate," Octavio Marenzi, who runs management consultancy Opimas, told CNBC. "There was some weakness in home lending, but cards and consumer banking more than made up for this, as well as a decline in fixed-income markets, but this was at least partially offset by gains in equities."

JPMorgan Chase & Co. Chief Financial Officer Marianne Lake tried to explain the divergence between bank earnings and stock price moves during the company’s earnings call, arguing that the “macro uncertainty noise” and overhang weighed the markets, reports Ciara Linnane for MarketWatch.

“Overthinking any one driver or conclusion might be challenging,” Lake told analysts. “As we look at the economy, we don’t see it slowing down. It seems to be continuing to grow pretty solidly.”

Mark Doctoroff, global co-head of Financial Institutions Group at MUFG, also believed that bank stocks have been viewed in a bad light since the financial crisis.

“But we’re in a really good environment,” Doctoroff said. “The consumer is healthy, corporate credit is healthy, there are little to no credit losses. There has been talk about slow loan growth, but that’s not the banks’ fault. It’s the evolution of the market that a lot of nonbank lenders are now taking share, from BDCs to private-equity to even asset managers. Overall, there is loan growth, it’s just not only at banks.”

For more information on the banking sector, visit our financial category.