Earnings Expectations for Major U.S. Banks

By Nupur Anand
NEW YORK (Reuters) – JPMorgan Chase and Wells Fargo are set to announce earnings, with investors keen on net interest income forecasts following robust job data that heightened uncertainty regarding future Federal Reserve rate cuts.

Both banks are likely to report lower profits for Q3, with interest income decreasing amid subdued loan demand. Recent years saw a surge in net interest income (NII) due to Fed rate hikes.

> "Weak loan growth, higher deposits, and increased loan loss provisions will pressure margins and moderately reduce NII," says Stephen Biggar, banking analyst at Argus Research.

Further rate cuts could diminish banks' interest income but may encourage borrowing and deal-making. According to Betsy Graseck from Morgan Stanley, a projected 150 basis points of rate cuts by mid-2025, alongside an anticipated avoidance of recession, will shift focus to future outlooks.

Investment banking divisions likely experienced a rise in activity for Q3 due to increased volumes in debt issuance and public offerings, although M&A activity remained lackluster. Oppenheimer anticipates a 7% increase in investment banking revenues, albeit below historical levels.

Trading divisions might see a revenue boost from renewed market volatility, although a typical seasonal slowdown may lead to declines compared to Q2, as noted by Moody's analysts.

Concerns about weaknesses in office loans persist, yet banks have set aside substantial reserves for potential losses. Consumer loan delinquencies are plateauing as banks tighten underwriting practices in light of last year's crisis.

Key Expectations for Major U.S. Banks:

• JPMORGAN CHASE: Expected to show nearly an 8% drop in earnings per share due to falling NII.
• BANK OF AMERICA: Anticipated 14% EPS decrease, with NII under pressure and modest investment banking gains.
• CITIGROUP: Projected 20% EPS decline amid weak revenue growth and increasing loan loss provisions.
• WELLS FARGO: Forecasted nearly 14% EPS drop, primarily due to NII challenges and ongoing regulatory scrutiny.
• GOLDMAN SACHS: Expected around 35% EPS increase with improved investment banking, but trading revenue may dip.
• MORGAN STANLEY: Anticipated 14% increase in EPS, driven by rising equity and capital markets activity.

Bank EPS Expectations for Q3 2024 vs. 2023

Source: Mean estimates compiled by LSEG