S&P 500 Financials Sector Earnings Preview: Q1 2025

The Financials sector will be a focus for the market during the next two weeks, as nearly 60% of the S&P 500 companies that are scheduled to report earnings for the first quarter over this period are part of this sector, including American Express, Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, Travelers Companies, and Wells Fargo. The Financials sector is predicted to report the fifth-highest year-over-year earnings growth rate of all eleven sectors for the first quarter at 2.3%.

At the industry level, four of the five industries in the sector are expected to report year-over-year earnings growth: Consumer Finance, Capital Markets, Banks, and Financial Services.

The Consumer Finance industry is expected to report the highest earnings growth in the sector at 23%. Three of the four companies in this industry are expected to report double-digit EPS growth, led by Discover Financial Services ($3.37 vs. $1.10).

The Capital Markets industry is expected to report the second-highest earnings growth in the sector at 10%. Within the Capital Markets industry, all three sub-industries are projected to report year-over-year earnings growth: Asset Management & Custody Banks (11%), Investment Banking & Brokerage (10%), and Financial Exchanges & Data (8%).

The Banks industry is expected to report the third-highest earnings growth rate at 5%. Within the Banks industry, both sub-industries are predicted to report year-over-year earnings growth: Regional Banks (11%) and Diversified Banks (4%).

The Financial Services industry is expected to report the fourth-highest earnings growth in the sector at 3%. Within this industry, two of the three sub-industries are projected to report year-over-year earnings growth: Diversified Financial Services (12%) and Transaction & Payment Processing Services (8%). The Multi-Sector Holdings (-7%) sub-industry is expected to a report a year-over-year decline in earnings.

On the other hand, the Insurance industry is the only industry in the Financials sector expected to report a year-over-year decline in earnings at -15%. This industry has also recorded the largest decrease in earnings of all 5 industries in the sector since the start of the quarter. On December 31, the estimated earnings growth rate for the Insurance industry was 8%. In addition, this industry is also the largest detractor to earnings growth for the sector. If the Insurance industry were excluded, the estimated earnings growth rate for the Financials sector would improve to 6.7% from 2.3%. Within the Insurance industry, two sub-industries are projected to report a year-over-year decline in earnings: Reinsurance (-50%) and Property & Casualty Insurance (-30%). The other two sub-industries are projected to report year-over-year earnings growth: Insurance Brokers (11%) and Life & Health Insurance (3%).

Stewart Johnson, Associate Director for Deep Sector Content, highlighted positive and negative macro-level themes to watch for in the Life & Health Insurance and Property & Casualty Insurance sub-industries during this earnings season:

Positive Macro-Level Themes:

Despite a turbulent economy, the earnings results of the Insurance industry—both the Life Insurance and Property & Casualty sectors—are positioned to benefit from several positive macro trends. One is a favorable investment environment. Expect earnings to benefit from improved 1Q interest income on insurance companies’ massive fixed-income bond portfolios and an absence of charges attributed to longer-term, alternative investments such as real estate. Do not expect a repeat of recent quarters when several companies with respectable underwriting results were hurt by alternative investment-related charges. Looking ahead, earnings are expected to benefit from higher interest income in a favorable investment environment and a reduction in negative charges attributed to alternative investments.

Negative Macro-Level Themes:

A favorable investment environment could be offset across sectors by powerful inflationary forces. P&C companies are very likely to report an increase in premiums, but higher costs to settle policyholder claims—from materials to rebuild houses to the parts needed to repair cars—will reduce margins and contribute materially to the expected decline in P&C sector earnings. This view is in line with broker estimates that point towards 1Q increases in premiums and the combined ratio for several large P&C companies. Life insurance companies are not as exposed as P&C companies to increases in claim costs, but life companies with significant overseas operations are likely to report that inflation negatively impacted exchange rates and pushed down repatriated earnings. The expected pressure on life insurance earnings is reflected in lower broker estimates of quarter-over-quarter earnings for several large life companies.

For more commentary and analysis on the insurance industry, please see Stewart’s articles on the FactSet Insight blog.

Looking ahead, analysts are predicting earnings growth rates for the Financials sector of 3.6%, 9.7%, 5.8%, and 18.9% for Q2 2025 through Q1 2026.

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