The financial sector will begin releasing second quarter earnings later this week with major bank stocks scheduled to report on Friday. Bank stocks had gained substantially immediately after Donald Trump emerged victorious in the U.S. Presidential elections. But as the Trump trade sputters, the catalysts that spurred the rally initially look increasingly inadequate and may be unable to boost stocks and earnings in the near future.

However, it’s not all doom and gloom for bank stocks, with the rate environment poised to become more favorable. Additionally, prominent names from the industry have cleared stringent stress tests and received approval for their capital spending plans. In such circumstances, it makes sense to pick up those bank stocks which carry strong fundamentals and are poised to beat projections during the upcoming earnings season.

Revenue, Earnings Growth Seems Elusive

On Friday, banking heavyweights Citigroup Inc. (C – Free Report) , JPMorgan Chase & Co. (JPM – Free Report) and Wells Fargo & Company (WFC – Free Report) will kick off the second quarter earnings season for the sector. The finance sector, the largest chunk of whose earnings results come from banks, reported +10.5% earnings growth in 2017 Q1 on +5.2% higher revenues. This is expected to decline this time around with total Q2 earnings expected to be up +5.8% from the same period last year on +2% higher revenues.

The reasons for lackluster revenue growth are not hard to seek. Industrial and commercial lending continues to suffer from significant weakness. Additionally, mergers and acquisitions and capital market operations have failed to take off. Only advisory operations have somewhat made up for the failure to grow in other areas. When it comes to earnings, banks are left with few costs to reduce after years of squeezing operational expenses which had helped to lift bottom lines.

Fed Clearances, Rate Hikes to Boost Banks

There are several other challenges which banks have been facing for some time now. But some of them may soon become a thing of the past. For instance, a soft rate environment has continued to weigh on margins. Additionally, the gap between long and short term interest rates continues to decline.