Wall Street’s biggest financial institutions kick off fourth-quarter earnings on Wednesday, with portfolio names Wells Fargo , Goldman Sachs , and BlackRock set to report results before the opening bell. The rally in financial stocks last year, which really started in October 2023, went into high gear in the run-up to the Federal Reserve ushering in a monetary easing cycle with a jumbo 50-basis-point interest rate cut at its September meeting. It was supercharged in early November after Republican Donald Trump emerged as the winner of the presidential race and the Fed cut rates by another 25 basis points. Following its December meeting, the Fed cut rates by another 25 basis points and projected two more reductions in 2025. Bank stocks, much like the broader market, have come off the boil in the new year as traders pushed up bond yields, signaling they think the Fed may have been too heavy-handed with its rate cuts. While the incoming Trump administration’s stance on regulations is seen as more business-friendly, some of the president-elect’s proposed policies, especially when it comes to trade tariffs, could be inflationary. The labor market has proven more resilient than expected too, raising concerns about sticky inflation. That’s why the market, according to the CME FedWatch tool, sees only one rate cut or maybe none this year. Against that backdrop, there are still individual factors to consider when Wells Fargo, Goldman Sachs, and BlackRock report their quarters. 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 on net interest income? Wells Fargo’s guide on net interest income (NII) — the difference between what the firm makes on loans and what it pays on deposits — will be crucial. Interest-based revenues for Wells took a hit last year as the Fed held rates higher for longer. Not only did this weigh on loan growth, but customers decided to take their deposit money to higher-yielding alternatives. Despite the Fed rate cuts, those higher-yield alternatives are still competing against deposits. The company has taken action, but we’re going to have to see how management deals with those higher funding costs. NII is expected to fall about 1% year over year in 2025 based on FactSet consensus estimates. 2. Will management continue to diversify revenue streams? We’ve praised Wells Fargo’s push into investment banking and other ways of accruing fee-based revenue streams. In recent years, the firm has made a slew of senior-level hires to expand its IB efforts. It’s a way for Wells to not rely so heavily on interest-based revenues like NII, which are at the mercy of the Fed’s policy decisions. Over time, these fee-based revenues can also be higher-margin revenue streams. Last quarter these efforts paid off as revenue from its investment banking division beat analysts’ expectations. An expected easing of regulations by the Trump administration is seen as a positive for dealmaking and initial public offerings (IPOs), which IB operations at Wells Fargo and Goldman Sachs help put together and get paid advisory fees. 3. Any further progress on the regulatory front? It’s unlikely that Wells Fargo executives will reveal too much, but analysts will likely ask about the steps Wells Fargo and CEO Charlie Scharf have taken to appease regulators. Scharf has been cleaning up the bank’s act in hopes of getting the Fed-imposed $1.95 trillion asset cap on Wells Fargo removed. It was placed in 2018 for past wrongdoings that predated Scharf. Any indication of progress on getting rid of the asset cap will be welcome news for shareholders like us. That’s because once the cap is gone Wells will be able to grow its balance sheet and invest further into budding yet lucrative lines of business such as investment banking. Based on recent reporting, there is a belief that the asset cap could be lifted as early as the first half of this year. 4. How does the bank’s expense guide measure up? We want to make sure that management’s strides to cut down on expenses are still taking place. When Scharf assumed the CEO role in 2019, Wells Fargo had one of the most bloated expense bases out of all the big banks. Scharf’s been slashing costs left and right ever since. We want to see more progress in the fourth quarter as well. Operating expenses are expected to be flattish year to slightly higher year over year in 2025, based on FactSet consensus estimates. GS YTD mountain Goldman Sachs (GS) year-to-date performance 5. What’s the state of Wall Street dealmaking? We’re long shares of Goldman Sachs because it’s a great investment banking rebound play. In fact, it’s so good that the Club exited Morgan Stanley entirely this month and plowed the money into starting and building a position in Goldman, a stop on Jim’s career on the Street. Therefore, remarks from Goldman management about the appetite for IPOs, mergers and acquisitions, and other kinds of dealmaking are key during the conference call. That’s because more deals mean more revenue for Goldman’s IB division, which made up a significant portion of overall revenue last quarter. We have already noticed an uptick in M & A, and some of those deals probably would have never come together without a Washington regime change. 6. What’s up with Goldman’s interest in private credit? The Wall Street Journal reported Monday that Goldman has plans to restructure itself to embark further into facilitating various types of financing deals. This will be the first quarter we hear directly from management about it. BLK YTD mountain BlackRock (BLK) year-to-date performance 7. What are BlackRock’s net new assets? It’ll be the first quarter that BlackRock reports as a portfolio stock since being added in late 2024. Net inflows will be a key metric to watch for the world’s biggest asset manager. BlackRock posted a record $11.48 trillion in assets under management (AUM) last quarter, up from $10.65 trillion in the quarter prior. The more assets that the firm rakes in, the more fees it can generate. If management stays disciplined on costs from there, this will help to improve BlackRock’s fiancial performance. 8. What are the firm’s operating margins? This is another important gauge for investors to watch because it measures how much profit BlackRock is generating from its core businesses before interest and taxes. A higher operating margin usually suggests that a company is more efficient in generating profits. Plus, this figure can also give investors a read into how BlackRock is managing its expenses. 9. How is BlackRock’s strategic push going? The asset manager has made a bunch of acquisitions over the past year to boost its presence in fast-growing segments like infrastructure and private credit. It recently completed a $12.5 billion deal to acquire Global Infrastructure partners to create a world-leading infrastructure private markets investment platform. It’s paying $3.2 billion to buy a private markets data provider called Preqin. More recently, BlackRock pushed into private credit with a $12 billion acquisition of HPS Investment Partners. We want to know how all these deals are progressing because they are key to the company’s goal of becoming a larger alternative manager. (Jim Cramer’s Charitable Trust is long BLK, WFC, GS. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. 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Wall Street’s biggest financial institutions kick off fourth-quarter earnings on Wednesday, with portfolio names Wells Fargo, Goldman Sachs, and BlackRock set to report results before the opening bell.
