The Financials sector will be a focus for the market during the upcoming week, as 65% of the S&P 500 companies that are scheduled to report earnings for the third 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 fourth-highest year-over-year earnings growth rate of all eleven sectors for the third quarter at 13.2%.
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: Consumer Finance, Insurance, Capital Markets, and Financial Services.
The Consumer Finance industry is expected to report the highest earnings growth rate in the sector at 29%. 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 Q3 2025 to pre-merger earnings (Capital One Financial stand-alone) in Q3 2024.
The Insurance industry is expected to report the second-highest earnings growth rate in the sector at 17%. Within the Insurance industry, three sub-industries are projected to report year-over-year earnings growth: Property & Casualty Insurance (27%), Insurance Brokers (13%), and Life & Health Insurance (1%). On the other hand, the Reinsurance (-7%) sub-industry is the only sub-industry in the sector predicted to report a year-over-year decline in earnings.
Stewart Johnson, FactSet Associate Director for Deep Sector Content, highlighted key themes to watch for the Insurance industry during this earnings season:
Looking ahead to 3Q, insurance earnings will be impacted by two similar macro trends faced by companies in 2Q.
On the negative side, P&C companies were confronted by increasing inflation, which pressures combined ratios and reduces underwriting income.
On the positive side, both P&C and life companies enjoyed strong equity markets that should provide a tailwind to investment income, especially P&C companies given heavier investment allocation to equities.
In addition to ongoing inflation and equity markets in 3Q, macro data surfaced that indicated a deterioration in jobs-related data, such as job creation and the unemployment rate. While not concerning at the current levels, further deterioration could impact earnings of life insurance companies with concentrations of group insurance sold to companies and employees.
Overall, the macro impact of positive 3Q equity market trends should bolster investment income and earnings for both life and P&C companies. The underwriting income and earnings of P&C companies was likely pressured by increasing inflation, which increases combined ratios, especially for companies without the ability to reprice premiums.
Finally, the 3Q onset of a deterioration in jobs data will not pose a risk to this quarter’s earnings, but continuing trends pose a risk to life insurance companies with concentrations of group business.
For more commentary and analysis on the insurance industry, please see Stewart’s articles on the FactSet Insight blog.
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 year-over-year earnings growth: Investment Banking & Brokerage (27%), Financial Exchanges & Data (11%), and Asset Management & Custody Banks (6%).
The Financial Services industry is expected to report the fourth-highest earnings growth rate in the sector at 11%. Within this industry, all three sub-industries are projected to report year-over-year earnings growth: Multi-Sector Holdings (22%), Transaction & Payment Processing Services (6%).and Diversified Financial Services (4%).
The Banks industry is expected to report the fifth-highest earnings growth rate in the sector at 9%. Within this industry, both industries are projected to report year-over-year earnings growth: Diversified Banks (9%) and Regional Banks (5%).
Looking ahead, analysts are predicting earnings growth rates for the Financials sector of 5.3%, 15.0%, 6.2%, and 11.0% for Q4 2025 through Q3 2026.
This blog post is for informational purposes only. The information contained in this blog post is not legal, tax, or investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.