Big U.S. banks JPMorgan Chase & Co. and Wells Fargo & Co. report their earnings for the third quarter this coming Friday. This is when Wall Street starts to look for new signs about how lower interest rates might help these banks make more money.
The next four banks to report will be Citigroup Inc. (C 2.17%), Goldman Sachs Group Inc. (GS 1.86%), Bank of America Corp. (BAC 2.19%), and Morgan Stanley (MS 3.17%). These will happen on Oct. 15, 16, and 17.
Lower interest rates may not help the big U.S. banks as much in their banking businesses because loans only make up a small part of their income compared to regional banks.
However, if the Federal Reserve’s interest rate cuts lead to more economic activity, deals, investments, credit card spending, and other financial transactions will all pick up. This will be good for diverse banks.
That’s for sure, Wall Street will pay close attention to what the biggest banks say about how the Fed’s moves will affect interest rates.
The main question is whether buyers will buy more bank stocks based on how much money they think they will make in the future.
A lot of KBW experts are talking about this subject right now.
“It makes sense that relative rate sensitivity is the main topic of our new investor
“There have been a lot of conversations, and there’s a strong sense of urgency to find relative standouts as stocks start to move on expectations of a multi-year easing cycle,” KBW analysts wrote in a report this week.
Other analysts have been looking at the rises in the stock prices of some banks to see if they’re undervalued or overvalued based on how much money they plan to make.
As of now, JPMorgan Chase has gained 20.4%, which at least one expert thinks should lead to a change in the company’s rating to a less bullish level.
The stock of JPMorgan Chase was lowered from overweight to equal weight by Morgan Stanley analyst Betsy Graseck on September 30.
As for JPMorgan Chase, Graseck said, “We see more room for positive net interest margin surprises elsewhere in our coverage. We model negative operating leverage next year and are taking some chips off the table after outperformance.”
Citigroup Inc., Goldman Sachs Group Inc., and Bank of America Corp. all got overweight grades from Graseck again.
Chris Kotowski, an analyst at Oppenheimer, said on Wednesday that most of the bank outlooks that were shared with investors at a series of industry conferences in September have not changed.
There is a lot of unpredictability in the markets right now because of the U.S. election and the instability in the Middle East, but Kotowski said that this has always been the case.
“Of course, everything could change tomorrow,” he said. “But we think this is about the most boring and predictable time for the economy you will ever see.”
Kotowski thinks that banks will report a 7% rise in investment banking income in the third quarter, mostly due to debt refinancings. However, he thinks that mergers and acquisitions and equity underwriting will be “lackluster.”
“We still believe that there will be a strong recovery and that Wall Street
“is usually not recognizing the full potential,” he said.
During the quarter, Michael Barr, vice chair of supervision for the Federal Reserve and head of bank regulation, talked about changes to the so-called Basel III endgame capital-requirement plans.
It is hoped that the changes will free up cash that banks could use for dividends and stock buybacks, but the rules won’t be finalized for a few months.
Analysts are a little more optimistic about JPMorgan’s results.
Analysts think that JPMorgan Chase will report $4 earnings per share and $41.49 billion in sales for the third quarter on Friday.
In the same time last year, the bank made $4.33 per share and made $39.874 billion in sales.
At the beginning of the quarter, on June 1, the average estimate for JPMorgan’s third-quarter results was $3.92 a share. However, analysts are now more optimistic about the results.
After the bank said that Wall Street’s estimates for its 2025 net-interest-income were too high, JPMorgan’s stock dropped 5% on September 10. This was the largest single-day move in the company’s history during the quarter.
He said, though, that the words are in line with the bank’s negative view of net interest income, which has been in place since the third quarter of 2022.
The latest estimate from JPMorgan Chase for 2024 net interest income, excluding its markets unit, is about $91 billion. This is more than the $89 billion estimate it made on April 12.
During the third quarter, Jamie Dimon, CEO of JPMorgan Chase, kept up a high public image by giving a number of speeches.
He mostly stuck to the points he made in his annual letter to shareholders and in a piece he wrote for the Washington Post over the summer about how important it is for U.S. presidents to talk to people from both parties.
Darko also said that the wars in Ukraine and the Middle East scared him more than inflation when it came to geopolitical risks.
JPMorgan Chase was said to be in talks with Apple Inc. AAPL 0.50% about taking over the Apple Card scheme from Goldman Sachs Group Inc.
1.86% GS, but the bank hasn’t said for sure that.
Expectations for Wells Fargo’s earnings have stayed the same.
Analysts think that Wells Fargo will report a profit of $1.28 per share on revenue of $20.39 billion in the third quarter. This is down from $1.48 per share and $20.86 billion in revenue in the same quarter last year.
The goal of $1.28 per share has stayed the same since the beginning of the third quarter, when Wells Fargo’s business was not very busy.
It is said that Wells Fargo has been making progress on lifting the $1.95 trillion asset cap that was put on the bank in 2017. This was the strictest regulatory action that Wells Fargo has ever faced after a series of violations, including a scam involving the creation of fake bank accounts.
The bank has asked a third party to look over its risk and control measures as part of its bid to get the cap lifted, the story said.
Citi, Goldman, and Bank of America will all report their numbers.
Bank of America is the biggest of the three banks that reported profit for the third quarter on October 15. Citigroup and Goldman Sachs are the next two biggest.
Analysts think that Bank of America will earn 77 cents a share on $25.29 billion in sales, down from 90 cents a share a year ago on $25.2 billion in sales.
Traders thought Bank of America would make 81 cents a share at the beginning of the quarter.
Analysts think Citigroup will make $1.31 per share on sales of $19.84 billion, down from $1.63 per share and $20.139 billion last year. Before July 1, they thought Citi would be worth $1.45 a share for the quarter, but now they don’t think that will happen.
Citi is going through a huge reorganization and has been keeping people up to date on its progress every three months. One thing it has been doing is planning an IPO for its Banamex retail bank in Mexico.
Goldman Sachs is projected to report earnings of $7.43 per share and revenue of $12.04 billion for the third quarter. This is up from $5.47 per share and $11.817 billion in the same quarter last year.
Analysts’ profit estimates for the bank have dropped the most, from $8.72 a share at the beginning of the quarter to $7.72 a share now.
Goldman Sachs’ profit forecast for the quarter was cut after Chief Executive David Solomon said on September 10 that the bank is losing about $400 million in income due to less trading and a smaller private equity investment portfolio.
Solomon talked about a “more challenging” macroeconomic environment, especially after the sharp drop in stocks in early August.
Morgan Stanley earnings estimates have been stable
Analysts expect Morgan Stanley to report third-quarter earnings of $1.60 a share on revenue of $14.32 billion when its releases its results on Oct. 16. Last year the bank had earnings per share of $1.38 and revenue of $13.173 billion.
With its large wealth-management unit as well as its E-Trade brokerage unit, Morgan Stanley’s earnings have been seen as more stable during the quarter.
Analysts have slightly trimmed Morgan Stanley’s third-quarter earnings estimate by 3 cents from their projection of $1.63 a share at the start of the quarter.
