Key Takeaways:

  • Recent uptick in rates might spell better times ahead for banks
  • Credit loss provisions still expected to weigh, but cost-cutting has likely helped
  • Housing market seen aiding Wells, while Citigroup’s
    C
    credit card business stays in focus

A lethal combination of ultra-low interest rates, credit worries, a steep economic slowdown, and tough government regulations ganged up on big banks this year. Despite that, expectations for the group’s Q3 earnings performance are on the rise.

Granted, the numbers don’t look like something to throw a party over, with research firm FactSet predicting cumulative Financial earnings to fall 19.4% from a year ago. The good news is that those expectations look a lot sunnier than where analysts were back in June, when they predicted a Financials Q3 earnings cratering of 34.4%.

Why the improvement? For one thing, many banks benefit from the energetic capital markets and the trading revenue they provide. Second, low rates have their good side, encouraging more loan activity.

Some of the big banks leading the upward earnings expectations meter include JP Morgan Chase
JPM
(JPM) and Wells Fargo
WFC
(WFC), FactSet reported. It appears likely they both could have relatively positive Q3 results despite all the headwinds they’ve faced and continue to face in this rough 2020.

The same goes for Citigroup (C), which, like JPM, is expected to report Q3 earnings early tomorrow. Those will be followed Wednesday morning by WFC.

Before zeroing in on individual banks, let’s scroll back for a broader view. Big banks haven’t performed well in the market this year, but they’ve generally done a great job setting aside money for possible credit losses and cutting costs. This could position most of them pretty nicely for any economic rebound once the pandemic passes.

That said, the credit

By Alps Funds

GREEN LIGHT FOR ACES LAST WEEK

  • As optimism builds for a second round of U.S. fiscal stimulus due to resurgent COVID-19 cases globally, the ALPS Clean Energy ETF (ACES) soared nearly 10% last week with gains from each of its 7 pure-play clean energy segments. ACES was driven higher by double digit gains from its Solar (+17.46%), Fuel Cell (+15.40%), and Biomass/ Biofuel (+12.39%) segments.
  • ACES Solar names were buoyed by positive analyst sentiment, a potential Democratic election sweep, and positive sentiment on China’s preliminary new clean energy goals, which will be finalized in Q1 2021. Four of the 6 ACES Solar names climbed over 15% on the week, led by Sunpower (SPWR, 1.43% weight) rallying over 27%.

ACCORDING TO THE EDISON ELECTRIC INSTITUTE, MORE THAN HALF OF ALL NEW ELECTRICITY GENERATION CAPACITY ADDED OVER THE PAST EIGHT YEARS IN THE U.S. HAS BEEN WIND AND SOLAR.

  • Within the Fuel Cell segment, Ballard Power (BLDP, 3.86% weight*) shot up over 12% last week after it announced it will be expanding manufacturing capacity of its fuel cell components by 6x by early 2021. Plug Power (PLUG, 5.39% weight*), the other ACES Fuel Cell name, was up over 21% last week after analysts upgraded the stock on its growth opportunities within fuel cell powered forklifts and heavy duty trucks.

FULLY INTEGRATED SOLAR PANEL AND BATTERY STORAGE SYSTEM IS HERE

  • At its Battery Day a few weeks ago, Tesla (TSLA, 4.49% weight*) highlighted how fast lithium-ion battery costs are declining for use in Elective Vehicles (EVs). Solar equipment suppliers, such as Enphase Energy (ENPH, 5.87% weight*), and solar equipment installers, such as SunPower and Sunrun (RUN, 6.57% weight*), are benefitting from falling battery storage costs as they all roll out fully integrated solar systems with battery storage.

Weekly ALPS ETF Spotlight 1

  • The levelized cost

Backed by a mothership with a cash balance of over $500 million and zero debt, Razer Fintech is no ordinary new kid on the block. Based in Singapore, they consider themselves the “world’s first global youth bank” and are quickly laying the groundwork for one of the future’s most innovative fintech platforms.

We recently sat down with CEO Lee Li Meng to talk about how his company plans to leverage extensive gaming tech expertise and a largely millennial client base to build a platform for digital banking and financial services. The session was attended by an audience of more than 200, with almost 80% of live polling participants aged 40 or below.

Razer is already a household name for many millennials, so “it’s the key audience we’ll be targeting as we look to expand our business [into digital banking],” Lee explains. While this gives Razer Fintech a head start in the market, the company faces the challenge of overcoming the younger generation’s aversion to banks. “The needs of this group have evolved very quickly and continue to evolve,” Lee says. “Being able to connect with them and really understand what they care about is key.”

Lee sees Razer Fintech’s main point of difference as experiential. “It’s not just a banking app where you make deposits and check your balance. It’s a lifestyle companion.” Another central element for Lee is client trust, which he believes banks have failed to gain. Putting clients first has allowed Razer “to build a very strong cult-like following,” he says. “That same DNA flows into how we run the Razer Fintech business.”

According to audience polling, however, pioneers of non-traditional banking models may yet have some work to do to gain client trust in the personal data space—with only 3% of the audience saying they’d trust