Big banks in the United States are expected to report a steep drop in first-quarter profitability compared to a year ago when they benefitted from extraordinarily robust dealmaking and trading, as well as the release of funds set aside for loan losses.
According to analyst forecasts from Refinitiv I/B/E/S, net income for the six largest US banks will be down approximately 35% from a year ago. Following Russia’s invasion of Ukraine in late February, investment banking revenues came to a halt.
According to Keefe, Bruyette & Woods analyst Christopher McGratty, the quarter will be difficult for the largest banks. The biggest impediment, he noted, is expected revenue losses of 36 percent in investment banking and 18 percent in trading.
“Last year, the banks’ capital markets were massive, so comparisons are tough,” McGratty remarked.
According to Barclays analyst Jason Goldberg, the quarter might be viewed as short-term pain with the promise of long-term gain. PNC Financial Services Group, for example, cut its first-quarter sales prediction but raised its full-year expectations on March 31, he observed.
Investors are expected to focus more on the possibility for banks to boost their net interest income, or the difference between income from loans and interest paid on deposits and other money, because banks profit from rising interest rates.
Bank CEOs will be questioned about whether the US economy would continue to thrive if the Ukraine conflict continues and the Federal Reserve raises interest rates to combat inflation. They may be questioned about whether lower-income borrowers can afford to repay their loans in light of recent increases in gas and food prices.
The largest bank in the United States, JPMorgan Chase & Co (JPM.N), publishes results on Wednesday.
Citigroup Inc (C.N), Wells Fargo & Co (WFC.N), Goldman Sachs Group Inc (GS.N), and Morgan Stanley (MS.N) all released earnings on Thursday. The following Monday, Bank of America Corp (BAC.N) is due.