Zinger Key Points
- Major US banks, led by JPMorgan, Wells Fargo and others, gear up to report their Q2 earnings this Friday.
- Other than reported EPS and revenues, investors will also focus on credit normalization, deposit rates, and capital.
American banks’ earnings season is nearly here, with some industry heavyweights set to announce their second-quarter results on Friday, July 14.
JPMorgan Chase & Co. JPM, Wells Fargo & Company WFC, BlackRock Inc. BLK, Citigroup C, and State Street Corp. STT will be among the first to report.
Goldman Sachs GS will report on Monday, July 17, while the day after it will be the turn of Bank of America BAC, Morgan Stanley MS, Charles Schwab SCHW and Bank of New York Mellon BK.
What Happened in the Banking Industry Last Quarter?
Concerns about the U.S. banking sector that had arisen following the March bankruptcy of Silicon Valley Bank and Signature Capital subsided throughout the second quarter.
Although there were initial worries that bank failures would cause a credit crunch, this event did not materialize, and the Fed has frequently emphasized the robustness and safety of the U.S. financial system.
May and June were favorable months in financial markets, following a strong rally in the SPDR S&P 500 ETF Trust SPY and the Invesco QQQ Trust QQQ.
In the second quarter, the financial sector, ras tracked by the Financial Select Sector SPDR Fund XLF, posted a 5.44% gain. However, regional banks, tracked by the SPDR Regional Banking ETF KRE, saw a decline of 4.8%, even with a considerable rebound starting in May.
The top three performers over the quarter among major U.S. banks were Wells Fargo (16%), JP Morgan (13%), and Charles Schwab (10%). The laggards were Morgan Stanley, down 1.6%, and Citigroup, down 0.5%.
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Banks’ Earnings Approaching: What Investors Should Monitor
The impact of rising deposit rates on funding costs, the emergence of any credit normalization or tightening in the face of elevated interest rates, and the aftermath of the regional bank crisis in March are all key areas that investors should keep in mind when analyzing banks’ Q2 earnings reports.
All 23 large U.S. banks passed the Federal Reserve’s stress tests last month, showing that they had enough capital to withstand hypothetical losses of $540 billion in the most adverse scenario.
Investors should also keep an eye on the capital levels of individual banks at the end of the quarter, especially in light of a forthcoming Federal Reserve regulation that will mandate a 2% increase in capital for all banks with more than $100 billion in assets.
Banks’ Q2 Earnings: EPS, Revenue Forecasts, and Expected Quarterly Variation
| Date | Company | Q2 Consensus EPS | Q1 Reported EPS | Expected %chg in EPS (QoQ) | Q2 Consensus Revenues | Q1 Reported Revenue | Expected %chg in Revenues (QoQ) |
|---|---|---|---|---|---|---|---|
| Friday, Jul 14 | JPMorgan | 3.96 | 2.76 | +43.48% | 39.15B | 30.72B | +27.44% |
| Friday, Jul 14 | Wells Fargo | 1.18 | 0.82 | +43.90% | 20.1B | 17.03B | +18.03% |
| Friday, Jul 14 | BlackRock | 8.43 | 7.36 | +14.54% | 4.48B | 4.53B | -1.10% |
| Friday, Jul 14 | Citigroup | 1.37 | 2.19 | -37.44% | 19.59B | 19.64B | -0.25% |
| Friday, Jul 14 | State Street | 2.11 | 1.94 | +8.76% | 3.14B | 2.95B | +6.44% |
| Monday, Jul 17 | Goldman Sachs | 4.17 | 8.79 | -52.55% | 10.7B | 12.2B | -12.30% |
| Tuesday, Jul 18 | Bank of America | 0.84 | 0.73 | +15.07% | 25.12B | 22.69B | +10.72% |
| Tuesday, Jul 18 | Morgan Stanley | 1.37 | 1.44 | -4.86% | 13.4B | 14.46B | -7.33% |
| Tuesday, Jul 18 | Charles Schwab | 0.73 | 0.97 | -24.74% | 4.67B | 5.26B | -11.22% |
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