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Regional banks' earnings reports weren't a disaster, but neither were they a picture of health.
What you need to know today
- U.S. markets rose Monday amid mixed results from regional banks. Europe's Stoxx 600 index closed flat, as travel and leisure stocks rose while 1.5%, while financial services dropped 2.1%.
- Samsung is reportedly considering switching from Google to Microsoft's Bing as the default search engine on its phone. If the South Korean conglomerate carries through on its plan, Alphabet, Google's parent, could lose billions of dollars in advertising. Alphabet sank 2.66% on the news.
- SpaceX, Elon Musk's spacecraft company, postponed the launch of its next-generation Starship rocket less than 15 minutes before its scheduled liftoff. Starship is pivotal to NASA's program of sending astronauts to the moon again
- Apple officially launched its Apple Card savings account, which offers a 4.15% annual interest rate. Offered through Goldman Sachs, the Apple account's percentage yield is more than 10 times the U.S. average.
- PROÂ Higher interest rates helped big U.S. banks reap huge profits and revenue. But they're hurting smaller banks like State Street, which fell short of earnings expectations. Here's why rates affect those banks' revenue differently.
The bottom line
Regional banks in the U.S. began reporting results Monday. It wasn't the disaster many had feared, but it didn't paint a picture of health in the sector, either.
First, the good news. Charles Schwab's first-quarter net income rose 14% from a year ago to $1.6 billion, while its revenue increased 10% to $5.12 billion. Its revenue didn't reach Wall Street's estimate, but it's pretty remarkable the bank (which also functions as a brokerage) managed to increase its profit despite being one of the hardest-hit financial institutions amid SVB's collapse. Investors thought so too, pushing Charles Schwab shares 3.94% higher.
M&T Bank, a bank with assets of $201 billion (as of 2022), posted even better results. It beat first-quarter expectations on both the top and bottom lines, causing its stock to surge 7.78%.
But other banks didn't fare as well. State Street, which is a custodian bank that holds financial assets like stocks and bonds, saw a 5% decline in first-quarter net income, to $549 million, even though its total revenue rose. The report made investors unload State Street stock, which plunged 9.18%.
Bank of New York Mellon, another large custody bank, sank 4.59% after State Street posted its earnings.
Earnings aside, all banks that reported Monday revealed a drop in deposits. Those at State Street and M&T shrank about 3%, while Charles Schwab saw an 11% drop in deposits from the prior quarter. However, when juxtaposed against the banks' stock movement, it seems investors were more concerned about profitability than the size of deposits, which could be a promising signal that it's back to business as usual in the sector.
The major U.S. indexes all rose, but only mildly. The S&P 500 added 0.33%, the Dow Jones Industrial Average 0.3% and the Nasdaq Composite rose 0.28%. Investors are still waiting for companies in other industries to report this week — some, like health care and communications, may disappoint investors, according to Sam Stovall, chief investment strategist at CFRA Research.
″It's sort of a wait and see," Stovall said, "because what the banks giveth, the rest of the market might taketh away."
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