Wall Street’s largest financial institutions will report fourth-quarter earnings on Wednesday, with portfolio companies including Wells Fargo, Goldman Sachs and BlackRock set to report results before the market opens. Last year’s rise in financial stocks actually started in October 2023. Before the Federal Reserve slashed interest rates by 50 basis points at the September meeting to start the monetary easing cycle, the rise in financial stocks entered high gear. In early November, market sentiment became stronger after Republican Donald Trump emerged as the winner of the presidential election and the Federal Reserve cut interest rates by another 25 basis points. After the December meeting, the Federal Reserve cut interest rates again by 25 basis points, and is expected to cut interest rates two more times in 2025. This suggests they believe the Fed’s interest rate cuts may be too harsh. While the incoming Trump administration’s stance on regulations is seen as more pro-business, some of the policies proposed by the president-elect, particularly on trade tariffs, could stoke inflation. The labor market has also proven more resilient than expected, raising concerns about sticky inflation. That’s why, according to the CME Group’s FedWatch Tool, markets are expecting just one rate cut this year, and possibly no rate cuts at all. Against this backdrop, Wells Fargo, Goldman Sachs and BlackRock still have individual factors to consider when reporting quarterly results. We’re 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 guidance on net interest income (NII) – the difference between the company’s loan income and deposit payments – will be critical. Wells Fargo’s interest income took a hit last year as the Federal Reserve kept interest rates higher for longer. Not only does this impact loan growth, but also customers’ decisions to shift deposits towards higher-yielding alternatives. Despite the Fed’s interest rate cuts, these high-yielding alternatives are still competing with deposits. The company has taken action, but we’ll have to see how management responds to higher financing costs. NII is expected to decline by about 1% annually through 2025, according to FactSet consensus estimates. 2. Will management continue to diversify its revenue streams? We applaud Wells Fargo’s move into investment banking and other cumulative fee-based revenue streams. The company has hired a raft of senior executives in recent years to expand its IB business. This is a way for Wells Fargo to rely less heavily on interest-based income like NII, which is subject to the Fed’s policy decisions. Over time, these fee revenues may also become a higher-margin revenue stream. Those efforts paid off last quarter, with revenue from its investment banking unit beating analysts’ expectations. The expected loosening of regulations by the Trump administration is seen as a boon to dealmaking and initial public offerings, and Wells Fargo and Goldman Sachs’ IB businesses help put together the deals and earn advisory fees. 3. Any further developments on the regulatory front? Wells Fargo executives are unlikely to reveal much, but analysts are likely to ask about the steps Wells Fargo and Chief Executive Charlie Scharf are taking to appease regulators. Schaaf has been cleaning up the bank’s conduct and hopes to lift the $1.95 trillion asset cap imposed on Wells Fargo by the Federal Reserve. In 2018, Scharf was punished for past misconduct. For shareholders like us, any sign of progress towards lifting the asset cap will be welcome news. That’s because once the cap is lifted, Wells Fargo will be able to expand its balance sheet and invest further in new but lucrative areas of business like investment banking. According to recent reports, it is believed the asset cap could be lifted as soon as the first half of this year. 4. What are the bank’s fee guidelines? We want to make sure management continues its efforts to cut expenses. When Schaff became CEO in 2019, Wells Fargo had one of the largest expense bases of any big bank. Since then, Schaaf has been cutting costs left and right. We also hope to see more progress in Season 4. Operating expenses are expected to be flat or slightly higher than a year ago in 2025, according to FactSet consensus estimates. GS YTD Mountain Goldman Sachs (GS) Year-to-date Performance 5. What’s the state of trading on Wall Street? We’re long Goldman Sachs stock because it’s a good rebound strategy for the investment bank. The fact that the club exited Morgan Stanley entirely this month and used the funds to set up and build a position at Goldman Sachs is fantastic, a capstone to Jim’s career on Wall Street. As such, comments from Goldman Sachs management about interest in initial public offerings, mergers and acquisitions and other types of deals were key during the call. That’s because more deals mean higher revenue for Goldman’s IB unit, which accounted for a large portion of total revenue last quarter. We have noticed an increase in M&A activity, and without a regime change in Washington, some of these deals may never have been completed. 6. How has Goldman Sachs’ interest in private credit changed? The Wall Street Journal reported on Monday that Goldman Sachs plans to restructure to further facilitate various types of financing transactions. This will be the first quarter that we hear this directly from management. BLK YTD mountain BlackRock (BLK) Year-to-date performance 7. What is BlackRock’s net new assets? This will be BlackRock’s first quarterly report since adding the stock to the portfolio in late 2024. BlackRock’s assets under management (AUM) reached a record $11.48 trillion last quarter, up from $10.65 trillion in the previous quarter. The more assets a company acquires, the more expenses it incurs. If management continues to tightly control costs on this basis, it will help improve BlackRock’s financial performance. 8. What is the company’s operating profit? This is another important metric for investors to watch, as it measures the EBIT that BlackRock generates from its core business. A higher operating margin generally indicates a company is more efficient at generating profits. Additionally, this number can give investors a sense of how BlackRock is managing its expenses. 9. How is BlackRock’s strategy progressing? The asset manager has made a series of acquisitions over the past year to bolster its presence in fast-growing areas such as infrastructure and private credit. It recently completed a $12.5 billion deal to acquire Global Infrastructure Partners to create the world’s leading infrastructure private markets investment platform. The company spent $3.2 billion to acquire a private market data provider called Preqin. Recently, BlackRock entered the private credit sector with its $12 billion acquisition of HPS Investment Partners. We’d like to know what’s going on with all of these deals, as they are key to the company’s goal of becoming a larger alternative management company. (Jim Cramer’s Charitable Trust Buys BLK, WFC, GS. See here for a full list of stocks.) As a subscriber to Jim Cramer’s CNBC Investing Club , you will receive trade alerts before Jim Cramer trades. Jim waits 45 minutes after sending a trade alert before buying or selling stocks in his charitable trust portfolio. 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Wells Fargo, BlackRock and Goldman Sachs.
Gina Moon | Reuters | Justin Sullivan | Michael M. Santiago | Michael M. Santiago Getty Images
Wall Street’s largest financial institution reported fourth-quarter earnings on Wednesday, with portfolio names Wells Fargo, Goldman Sachsand BlackRock Results are scheduled to be reported before the market opens.
