The S&P 500’s financials sector (NYSEARCA:XLF), which holds a 12.6% weightage on S&P 500, experienced declines in the third quarter, falling about 1.60% in Q3.
The heavy-weight sector, which consists of big companies, especially banks such as JPMorgan Chase (JPM), Wells Fargo (WFC) and Citi (C) to name a few, has been under pressure this year, with the regional banking crisis earlier in 2023, rising interest rates and weakening growth prospects, among other others.
The sector, however, saw the largest inflow of cash since April, according to Bank of America Securities weekly equity client flow trends report.
Among the asset managers, the industry last year was battered by dampening investor appetite over recessionary fears, and saw massive outflows.
Money managers are now looking to recover as the economy stabilizes, but recent asset under management figures from the companies show a slight dip in Sept., due to weaker markets.
According to Seeking Alpha’s Quant Rating system, the Financials sector has an average health score of 3.38. The system awards grades based on quantitative measures, like valuation, earnings growth and recent stock performance. The highest possible score for any individual company is a 5.
Chubb (CB), Arch Capital (ACGL) and Everest Group (EG), the firms that deal in property and casualty insurance and reinsurance, tops quant rating chart.
U.S. property/casualty insurers’ underwriting results are expected to be better this year over higher premium rates in underperforming automobile and property segments, said ratings agency Fitch.
Insurer Chubb (CB) is leading with the highest score in the group, rating a 4.86 out of 5. A high grade for the profitability boosted its ratings, but the company did not fare well in valuation.
CB had reported better-than-expected Q2 earnings with core operating income ((net tax)) of $4.92 per share, beating the $4.42 average analyst estimate.
CB’s peer, ACGL leads the pack and ties with CB with a rating of 4.86 out of 5. The company scored high grades in momentum, growth and profitability, but was dragged down by valuation.
ACGL also reported robust Q2 results, with Q2 Non-GAAP EPS of $1.92 beats by $0.33.
EG also made its mark in the top three, with a rating a 4.83 out of 5. The management consulting company scored high grades in growth and profitability.
Fintech firm MarketAxess (MKTX) bottomed the sector with a low grade of 2.09.
MKTX’s total average daily volume in Sept. fell 9% Y/Y to $29.6B, hurt by continued low levels of volatility dampening ETF market maker activity and favored select trading protocols. Shares in the company declined 18.3% year to date.
S&P Global said EPS for the financial sector is expected to rise 18.7%, while Goldman Sachs expects the EPS to grow by 10%.
