3 Big Bank Stocks That Could Bounce on Q1 Earnings


  • Bank of America (BAC): Net interest income is set to surge thanks to its large non-interest-bearing deposit base.
  • Goldman Sachs (GS): Its online banking platform, Marcus, continues to gain traction in the consumer market.
  • Wells Fargo (WFC): Primed to benefit from rising interest rates and increasing loan demand.
bank stocks Hand inserting ATM card into bank machine to withdraw money
Source: totojang1977 / Shutterstock.com

Big bank stocks are at crossroads as they face a crucial inflation report, and get ready to release first quarter metrics. Financial shares are the first to kickstart this busy earnings season in April.

Wall Street expects the March consumer price index (CPI) to exceed the record high level of 7.9% reported last February. Understandably, the financial sector is critical to a market concerned about the impact of rate hikes by the Federal Reserve (Fed).

For instance, so for in 2022, the Dow Jones U.S. Banks Index has lost about 11%. Similarly, the Invesco KBW Bank ETF (NASDAQ:KBWB), which is dominated by the largest U.S. banks, is down almost 12% year-to-date (YTD).

The financial sector tends to benefit from inflation and interest rate hikes as long as they don’t hurt the broader economy. Banks with outstanding variable-rate loans earn more net interest income (NII) as interest rates rise. However, forecasts by Refinitiv suggests that S&P 500 earnings in the first quarter could increase by 6.1%, but the financial sector should see a decline of 22.9%.

Therefore, financial stocks are facing question marks this earnings season. Therefore, buy-and-hold investors should focus on robust bank shares that are likely to survive the ebbs and flows in our economy in future months.

With that information, here are three big bank stocks that could gain significant traction in coming months.

BAC Bank of America $38.82
GS Goldman Sachs $321.97
WFC Wells Fargo $48.54

Bank Stocks: Bank of America (BAC)

Bank of America (BAC) logo on top of a retail office building.
Source: 4kclips / Shutterstock.com

Our first big bank stock is Bank of America (NYSE:BAC), which has more than $2.5 trillion in assets. The bank provides consumer banking as well as wealth and investment management services. It is the second-largest lender stateside.

Bank of America announced Q4 2021 results on Jan. 19. Revenue increased 10% year-over-year (YOY) to $22.1 billion. Net income soared 28% YOY to $7 billion, or 82 cents per diluted share, up from $5.5 billion in the prior-year quarter.

The bank is one of the most interest-sensitive among big banks. Put another way, rate hikes affect profits considerably. It generated $43 billion in NII over the past year. However, out of its $2 trillion deposit base, almost 40% is non-interest-bearing accounts, suggesting minimal adverse effects from rate hikes.

BAC stock declined 13% YTD. Shares are trading at 12.3 times forward earnings and 3.8 times trailing sales. Meanwhile, the 12-month median price forecast for BAC stock stands at $50.

Goldman Sachs Group (GS)

Image of a smartphone with the Goldman Sachs logo on it.
Source: iotr Swat/Shutterstock.com

Our next big bank stock is Goldman Sachs (NYSE:GS). The global investment bank offers various finance-related services, including investment management, consumer banking, and cryptocurrency trading desks for Bitcoin (BTC-USD) and Ethereum (ETH-USD). 

Goldman Sachs issued Q4 results on Jan. 18. Revenue increased 8% YOY to $12.64 billion. Net earnings came in at $3.8 billion, or $10.81 per diluted share, down from $4.4 billion, or $12.08 per diluted share, a year ago.

The banking giant is leveraging its strong brand recognition to gain traction in the consumer market through its online banking arm, Marcus. Total loans issued through this platform have grown from $106.4 billion to $146.3 billion in 2021. In addition, Marcus has launched co-branded credit cards with General Motors (NYSE:GMand Apple (NASDAQ:AAPL).

GS stock has declined almost 16% YTD. Shares look undervalued at 8.22 times forward earnings and 1.93 times trailing sales. At present, the 12-month median price forecast for Goldman Sachs stock is $419.

Bank Stocks: Wells Fargo (WFC)

Wells Fargo (WFC) bank sign in yellow and red with wagon logo. The sign is flanked by tall grass
Source: Ken Wolter / Shutterstock.com

Our final big bank stock is Wells Fargo (NYSE:WFC). It offers consumer, commercial, corporate, and investment banking in addition to wealth management services. We should note that the group still operates under a $1.95 trillion asset cap the Fed imposed in 2018 after the fake accounts scandal.

Wells Fargo released Q4 results on Jan. 14. Revenue increased 13% YOY to $20.9 billion. Net income came in at $5.75 billion, or $1.38 per diluted share, up from $3.09 billion a year ago.

Analysts concur that Wells Fargo stands to benefit from rising interest rates. The bank noted that a 1% parallel move in shorter- and long-term rates would generate an additional $7.1 billion of net interest income over the next year. Additionally, management is conducting a multi-year efficiency initiative to minimize annual expenses.

WFC stock has returned 20% over the past year. Shares are trading at 13.26 times forward earnings and 2.5 times trailing sales. Finally, the 12-month median price forecast for Wells Fargo stock stands at $62.

On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.

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