Talking Points for U.S. Banks
JPMorgan Chase is scheduled to disclose its third-quarter earnings results on Wednesday, formally kicking off the earnings season for major US financial firms.
Big banks’ profits are anticipated to decline following Q2’s extraordinary windfalls, but the earnings forecast should stay positive in response to an environment of increasing rates.
C-suite optimism might be a positive trigger for bank stocks, increasing XLF in the medium run.
During the start of earnings season, investors will be able to judge the health of the equities market and its prospects.
Bank of America, Citigroup, Wells Fargo, and Morgan Stanley will announce their results on Wednesday before the opening bell, followed by those of the other major institutions on Thursday. Finally, Goldman Sachs will report its results on Friday.
Some of the biggest U.S. banks are expected to report profits this week, as shown in the table below.
Yahoo Finance, the original source of this information
Large-cap bank profits are expected to moderate after a spectacular second quarter performance, but should remain healthy and robust by historical standards, up 20% year-over-year, supported by consumer fees, wealth management fees and strong gains in investment banking divisions due to record M&A activity.
Goldman, Morgan Stanley and JPMorgan are well-positioned to gain from the trend and may see their underwriting and advising fees grow by more than 20% year-over-year, which could improve their bottom lines and counteract the decline in fixed income and stock trading volumes.
Following quarterly reports, traders should look at how the macroeconomic background has affected bank fundamentals recently and closely monitor company guidance to predict future earnings and modify their expectations accordingly.
In spite of the market fears of an economic slowdown, banks are expected to stay optimistic about lending activity as loan demand grows quicker and margins improve as bond rates continue to rebound and the Treasury curve steepens.
The prognosis for net interest income, which makes up more than half of the banking industry’s revenue, is one issue to keep an eye on.
Megabank stocks might continue to do well in the coming months if lenders express confidence that this indicator will continue to trend upward as the Fed tightens monetary policy and the economy transitions to higher interest rates.
With the financial XLF ETF in a strong position, it’s possible that it may set new all-time highs before the year is through.