Bank earnings preview: What to expect for big banks

$JPMorgan Chase(JPM)$ , $Citigroup(C)$ , $BlackRock(BLK)$ , and $Wells Fargo(WFC)$ will kick off the financial sector’s reporting season on October 13, followed by $Bank of America(BAC)$ and $Goldman Sachs(GS)$ on October 17, and $Morgan Stanley(MS)$ on October 18.

Financials performance by sector: Insurance industry is the standout

The Financials sector is expected to see a 8.7% year-over-year earnings growth rate, ranking fourth among all sectors.

• The Insurance industry is the standout performer with a 64% growth rate, significantly boosting the sector.

Excluding insurance, Financials' growth drops to 2.1%.

• Sub-industries like Property & Casualty Insurance and Multi-line Insurance show strong growth, while Reinsurance is expected to recover.

• In the Financial Services industry,

Multi-Sector Holdings (18%) and Transaction & Payment Processing Services (10%) are poised for double-digit earnings growth.

• Banks show a 4% growth.

Diversified Banks are set for 7% growth, but Regional Banks might decline by -15%.

What to focus on big banks earnings

$JPMorgan Chase(JPM)$ :

• Expected strong growth in net interest income, potentially offsetting a drop in trading revenues and fees.

• Forecasted EPS: 3.89, a 25% rise from the same quarter last year.

• Trading above its 2023 opening price, indicating market confidence in its stability.

$Citigroup(C)$ :

• Focus on managing costs and expenses due to recent restructuring.

• Forecasted EPS: 1.18, a 23% drop from the same quarter last year.

• Stock trading below its 2023 opening price, showing room for potential gains with positive earnings surprises.

$Bank of America(BAC)$ :

• Operating expenses rose in the inflationary environment of 2023.

• Forecasted EPS: 0.80, a 1% drop from the same quarter last year.

• Trading below its 2023 opening price, making it attractive to investors anticipating a rebound.

$Goldman Sachs(GS)$

• Expected rise in revenues driven by its wealth management division.

• Forecasted EPS: 5.34, a decrease of 36% from the same quarter last year.

• Earnings known to be volatile, but a rebound expected from Q2.

$Morgan Stanley(MS)$ :

• Revenues expected to drop due to the impact of bond yields on its stock.

• Forecasted EPS: 1.28, a 15% drop from the same period last year.

Financial sector faces multiple concerns

Key concerns for this earnings season include the impact of the Q3 increase in the 10-year Treasury yield on capital levels, stability of deposits, slowing loan growth, and rising loan loss provisions due to credit quality concerns.

Non-interest revenues face challenges, including weak mortgage volumes and stable credit card spending amid worsening credit.

Asset management revenues might decline due to market-driven reductions in assets under management. Stringent cost control measures are expected.