The Financials sector will be a focus for the market during the upcoming week, as 75% of the S&P 500 companies (21 out of 28) that are scheduled to report earnings for the first quarter over this period are part of this sector, including Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, Travelers Companies, and Wells Fargo. The Financials sector is predicted to report the third-highest year-over-year earnings growth rate of all eleven sectors for Q1 at 15.1%. This growth rate is also above expectations for earnings growth of 14.6% at the start of the quarter (December 31).
At the industry level, all five industries in the sector are expected to report year-over-year earnings growth. Four of these five industries are predicted to report double-digit growth: Insurance, Consumer Finance, Capital Markets, and Financial Services.
The Insurance industry is expected to report the highest earnings growth rate in the sector at 34%. Within the Insurance industry, all 4 sub-industries are projected to report year-over-year earnings growth: Reinsurance (90%), Property & Casualty Insurance (59%), Insurance Brokers (12%), and Life & Health Insurance (4%). At the company level, Travelers Companies, Allstate Corporation, and Chubb are expected to be the largest contributors to earnings growth for the industry. If these 3 companies were excluded, the estimated earnings growth rate for the Insurance industry would fall to 18% from 34%.
Stewart Johnson, Associate Director for Deep Sector Content, highlighted key themes to watch in the Insurance industry during this earnings season:
The operating environment over the last quarter provides a mixed backdrop to assess 1Q insurance company earnings, which are expected to be reported beginning next week. Here are sector highlights:
The equity market decline over 1Q poses a challenge to investment income results. Given P&C companies maintain higher, general investment allocations to equities, this challenge is likely to hit those companies more than life insurance companies.
Catastrophic events over the quarter will also impact earnings at P&C companies, with expectations for a mixed impact over the longer term. On the one hand, claims’ expenses likely increased during 1Q, but future underwriting results may benefit if regulators approve requests for rate increases of home and auto businesses in the aftermath of winter storms.
Investments in AI should produce continued operational expense reductions for claims and underwriting functions as they shift toward automation.
Expect attention to be focused on the impact of private investments in the insurance sector. Two issues should be addressed: portfolio credit quality and important changes to accommodate limits imposed on withdrawals in the wake of gating restrictions that a number of private equity funds have imposed for investors.
For more commentary and analysis on the insurance industry, please see Stewart’s articles on the FactSet Insight blog.
The Consumer Finance industry is expected to report the second-highest earnings growth rate in the sector at 30%. At the company level, Capital One Financial is projected to be the largest contributor to earnings growth for the industry. However, the company is benefitting from an apples-to-oranges comparison of post-merger earnings (Capital One Financial and Discover Financial Services) in Q1 2026 to pre-merger earnings (Capital One Financial stand-alone) in Q1 2025. If this company were excluded, the estimated earnings growth rate for the Consumer Finance industry would fall to 7% from 30%.
The Capital Markets industry is expected to report the third-highest earnings growth rate in the sector at 15%. Within the Capital Markets industry, all three sub-industries are projected to report double-digit (year-over-year) earnings growth: Investment Banking & Brokerage (16%), Asset Management & Custody Banks (14%), and Financial Exchanges & Data (14%).
The Financial Services industry is expected to report the fourth-highest earnings growth rate in the sector at 10%. Within this industry, all three sub-industries are projected to report year-over-year earnings growth: Multi-Sector Holdings (19%), Diversified Financial Services (13%), and Transaction & Payment Processing Services (6%).
The Banks industry is expected to report the fifth-highest earnings growth rate in the sector at 7%. Within this industry, both sub-industries are projected to report year-over-year earnings growth: Regional Banks (10%) and Diversified Banks (7%)
Looking ahead, analysts are predicting lower earnings growth for the Financials sector over the next four quarters. For Q2 2026 through Q1 1027, analysts are projecting earnings growth rates of 5.6%, 2.6%, 10.8%, and 12.2%, respectively.
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