Bank Stocks Decline $270 Billion Ahead of Major Earnings Reports
Institutional sentiment across major financial firms has fallen sharply heading into quarterly earnings reports. The five largest U.S. lenders, measured by the Invesco KBW Bank ETF (NASDAQ:KBWB), have dropped roughly $270 billion from their summer highs. While the broader market is up about 14% year-to-date, only 35% of institutional investors expect banks to outperform the market, down from 82% in December 2025.
The pullback follows a Federal Reserve benchmark rate increase in September that pushed up deposit and funding costs, putting pressure on bank net interest margins. The 10-year Treasury yield reached around 5.24%, creating potential challenges for corporate borrowing, commercial real estate loans, and dealmaking. Higher financing costs have slowed merger announcements and delayed initial public offerings.
Earnings season opens today as JPMorgan Chase & Co. (NYSE:JPM), Goldman Sachs Group, Inc. (NYSE:GS), Wells Fargo & Company (NYSE:WFC), and Citigroup Inc. (NYSE:C) post their latest results. Investors will watch whether rapid loan repricing can offset higher deposit expenses, with consensus forecasts projecting net interest income growth for several top lenders.
Key points
- The Invesco KBW Bank ETF (NASDAQ:KBWB) dropped about $270 billion from summer peaks despite a 14% year-to-date gain in the S&P 500.
- Institutional optimism for banks fell to 35%, down from 82% in December 2025.
- A September Federal Reserve rate hike raised funding costs and pushed the 10-year Treasury yield to roughly 5.24%.
- JPMorgan Chase & Co. (NYSE:JPM), Goldman Sachs Group, Inc. (NYSE:GS), Wells Fargo & Company (NYSE:WFC), and Citigroup Inc. (NYSE:C) report earnings today.
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How we writeDisclaimerQuestions and answers
Why are bank stocks pulling back ahead of earnings?
Major banks have pulled back due to rising bond yields, higher deposit costs following a September Fed rate hike, and slower M&A activity that compresses net interest margins.
Which major banks are reporting earnings today?
JPMorgan Chase & Co., Goldman Sachs Group, Inc., Wells Fargo & Company, and Citigroup Inc. are reporting their quarterly earnings before the market opens today.