Analysts Brace For Disappointing Q1 Bank Results

Earnings for U.S. banks kick off this week, with analysts expecting earnings in the first quarter to contract, marking the first time in three years.

According to a report in Reuters, JPMorgan Chase and Wells Fargo are slated to report quarterly earnings Friday (April 12) while Citigroup and Goldman Sachs will report earnings the following Monday. Bank of America and Morgan Stanley report the day after Citigroup and Goldman Sachs. With the U.S. economy showing signs of softness and the Federal Reserve expressing more cautiousness and the decline in ten-year Treasury yields, S&P 500 banks are expected to see year-over-year growth for the first quarter of 2.3 percent. That is down from the 8.2 percent Wall Street was expecting a mere six months ago.

“The Fed pivoted so abruptly, which gives one pause about what they’re saying about the economy,” said Chuck Carlson, chief executive officer at Horizon Investment Services, in the Reuters report. “Flat to falling interest rates are not good news for bank interest margins. It’s not surprising that analysts are taking down earnings estimates.”

Reuters noted that since October analysts have lowered their expectations for earnings for S&P 500 companies this year, with first-quarter estimates declining to 2.2 percent growth from 8.1 percent growth. It would be the first quarter of growth that is down since the so-called earnings recession that was over in 2016.  Reuters noted that the partial shutdown of the federal government that lasted over a month — and trading revenue that is expected to be down — has prompted Wall Street to get more cautious on quarterly earnings.  “Within financials, the industry that’s been hit hardest is capital markets,” Tajinder Dhillon, senior research analyst at Refinitiv, told Reuters. “Those downward revisions have intensified over the last 90 days. Of the big 6 banks, Goldman Sachs, Morgan Stanley, and JPMorgan have seen the biggest declines” in first-quarter earnings estimates.