(Bloomberg) -- US bank stocks jumped by the most in nearly two months on Friday, with Citigroup Inc (NYSE:C).’s strong second-quarter results helping lift sentiment for the entire sector.
Citigroup shares surged as much as 11%, their best day since November 2020, after the lender beat analyst expectations for both revenue and earnings on the back of a blowout quarter from its trading division. Meanwhile, Wells Fargo (NYSE:WFC) & Co. climbed 7.9% as investors looked past the bank’s worse-than-expected top and bottom lines figures and instead focused on its 16% increase in net interest income. The KBW Bank Index rose 4.8%, outpacing gains by the broader S&P 500 Index.
“This is the strongest major earnings report of the whole week in terms of reported numbers versus expectations and Citi has the added benefit of having one of the lowest PEs of any large company,” said Vital Knowledge’s Adam Crisafulli.
Friday’s rally is a much needed reprieve for investors who have watched bank shares go from being a best performing sector last year, to one of the worst in 2022. Even with its rebound to end the week, the KBW Bank Index is still down more than 22%, on pace for its biggest annual decline since 2011, amid concerns of a looming recession.
While Citigroup managed to beat analyst expectation in almost every category, one area of disappointment may come in the form of the bank’s share repurchase program. As was the case with JPMorgan Chase & Co. (NYSE:JPM) on Thursday, the lender’s chief financial officer Mark Mason announced that it would also be suspending stock buybacks in order to meet higher capital requirements set forth in the Federal Reserve stress test.
With four of the six largest US bank now having reported their results over the last two days, attention will quickly turn to next week’s release calendar. Both Goldman Sachs Group Inc (NYSE:GS). and Bank of America Corp (NYSE:BAC). will announce their results before the opening bell on Monday.
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