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…
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