Institutional Confidence in Banks Has Collapsed Ahead of Earnings

The banking sector has diverged from the broader equity rally. While the State Street SPDR S&P 500 ETF (NYSE: SPY ) is up about 14% for the year, the five largest U.S. banks, measured by the Invesco KBW Bank ETF (NASDAQ: KBWB ), have collectively dipped around $270 billion from summer peaks. Institutional investors have retreated — with only 35% expecting banks to beat the broader market, the Truist Securities survey showed, according to BigGo Finance. Compared with about 82% in December 2025, the decline reflects the repricing of bond yields. Earnings season starts today, with JPMorgan Chase & Co. (NYSE: JPM ), Goldman Sachs Group Inc. (NYSE: GS ), Wells Fargo & Co. (NYSE: WFC ), and Citigroup Inc. (NYSE: C ) reporting before the market opens. The Yield Shock Net interest margin is the gap between what banks earn on their assets and what they pay to fund them. That margin is now unde...