Big Banks Report Q4 Earnings Friday: Will JPMorgan, BofA, Citigroup, Wells Fargo Balance Sheets Foreshadow Recession?

The outlook for the American economy has been largely gloomy in recent months due to rising interest rates, weak consumer spending, and inflation reaching a four-decade high. Most economists predict some kind of recession in 2023.

While an economic downturn remains a possibility, the Labor Department reported on Thursday that top-line inflation rose 6.5% in December, down from 7.1% in November, indicating the Fed's aggressive interest rate hike campaign is lowering inflation.

With inflation showing signs of easing, investors look forward to Friday's earnings prints from the nation's largest banks.

Big banks like JPMorgan Chase & Co JPM, according to a Wall Street Journal report, have been setting money aside in recent quarters to cover potential losses on consumer credit loans if the economy weakens.

Read also: If You Invested $1,000 In JPMorgan Chase At Its COVID-19 Pandemic Low, You'd Have This Much Now

The hedges on those potential losses would show up on big bank balance sheets and could serve as an indicator of where the U.S. economy is headed.

Which banks report earnings on Friday?

JPMorgan, Bank of America Corp. BAC, Citigroup Inc. C and Wells Fargo & Co. WFC will release fourth-quarter results on Friday.

Goldman Sachs Group Inc. GS and Morgan Stanley MS will report Tuesday.

• Analysts expect JPMorgan to report quarterly earnings of $3.09 per share on revenue of $34.31 billion.
• Analysts estimate that Bank of America will report an earnings of 77 cents per share on revenues of $24.33 billion.
• Analysts expect Citigroup to report quarterly earnings of $1.17 per share on revenues of $19.9 billion.
• Analysts expect Wells Fargo to report earnings of 62 cents per share on revenues of $19.98 billion.

Banks are expected to earn a cumulative $28 billion in profits in the fourth quarter, a 15% decrease from the previous year, according to FactSet, which the Journal cited.

Revenues are expected to increase from the previous year, owing largely to the Fed's rate hikes. These increases have increased the difference between what commercial banks pay depositors and what they earn by lending money out, according to the Journal.

The difference, known as the net interest margin, increased the most on a quarterly basis in the third quarter, the Journal noted, citing the Federal Deposit Insurance Corp.

Big bank loan books have continued to expand, particularly commercial and industrial and credit-card loans.

Read next: Inflation Falls In December, Stocks Struggle To Find Direction: What You Need To Know

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