When the largest banks in the U.S. start reporting fourth-quarter results, it is expected that profits will be down by as much as 40 percent from last year, Reuters reported on Monday (Jan. 11).
Analysts are forecasting a 42 percent drop in fourth-quarter profits for Citigroup and a 39 percent decline for Wells Fargo. J.P. Morgan Chase is expected to drop by about 5 percent. All three will post results on Friday (Jan. 15).
When earnings reports are filed the following week, Bank of America is anticipated to report a 33 percent profit decline.
Morgan Stanley is expected to be up 1 percent, while Goldman Sachs is anticipated to post a 43 percent increase.
“You can look at Q4 as somewhat of a transition quarter, as you put some of the challenges from 2020 in the rear-view mirror and look ahead to an improved 2021,” Barclays Analyst Jason Goldberg told Reuters, pointing to the pandemic-fueled interest rate freefall and record margin drop.
The unprecedented COVID-19 pandemic also caused big banks to earmark more than $65 billion for anticipated loan defaults.
A big rebound is expected in 2021. Refinitiv’s IBES estimates that banks’ profits could more than double, since they’re starting at such a low level.
The distribution of coronavirus vaccines and the election results have caused bank stocks to go up 35 percent since early November. The Federal Reserve also said it would start letting banks repurchase stock again, which will boost earnings per share, Reuters said.
Digital banking got a boost from the pandemic as people stayed home, shopped online and sought contactless payments. U.K. FinTech Revolut broke even and said it now has more than 12 million personal customers and 500,000 business customers.
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