Bigger banks rise while regionals slump as Q1 earnings season kicks off

(Reuters) – Shares in U.S. banks were a mixed bag on Friday with JPMorgan Chase soaring 7.0% after its quarterly report impressed investors while PNC Financial was among regional bank decliners after it reduced growth expectations for 2023.

JPMorgan, the biggest U.S. lender by assets, reported a first-quarter profit that beat estimates with interest income offseting weakness in dealmaking. Shares in Citigroup climbed after its first-quarter profit also beat expectations as it earned more from borrowers paying higher interest on loans.

Also boosted by their rivals reports were Bank of America and to a lesser degree Goldman Sachs – both due to report results on Tuesday. Morgan Stanley reports results on Wednesday.

However, Wells Fargo investors were less impressed, with its shares down 0.2%, after it beat first-quarter profit expectations as it benefited from higher interest rates, but executives said they expect the U.S. economy to slow in response to tighter monetary policy.

In the regional banking sector, which was hit by a crisis last month with the failure of Silicon Valley Bank and Signature Bank, First Republic and Zions Bancorp fell in sympathy with PNC, which gave loan and revenue growth guidance for 2023 that fell short of Wall Streets expectations.

PNCs net interest income, while higher than the year-ago quarter, was roughly 1% shy of the mean analyst expectation.

Credit Suisse analyst Susan Katzke also noted in research that PNCs 2023 revenue guidance for growth of 4% to 5% was lower than previous expectations for 6% to 8% growth, while its estimate for average loan growth fell to a 5% to 7% range from a 6% to 8% range.

PNC shares were last down 1.9% while Zions was off 3.3% and Comerica Inc shares fell 3.0%. First Republic shares fell 1.5%.

JPMorgan shares hit their highest level since early March and were on track for their biggest one-day percentage gain since November 2020.

Citi shares rose 4.2% and Bank of America was up 3.0% as their investors appeared to be encouraged by JPMs news. Morgan Stanley shares rose 0.9% while Goldman shares were up 1.1%.

The S&P 500 bank index rose 3.1% after the reports.

Friday‘s big jump in bank stocks helped a trader reap a big gain on a timely trade in Financial Select Sector SPDR Fund’s options. The ETF was last up 0.6%. A trader, who had bought 100,000 of the XLF April $33.5 call options for about $1.2 million on Thursday, appeared to have sold the position for a profit of about $800,000, or 67%, early on Friday, according to data from options analytics firm Trade Alert.

(Reporting By Sinéad Carew; Editing by Josie Kao)