Profit updates from the U.S.’s largest banks are expected to fare better than their stock price weakness would suggest when third-quarter earnings season kicks off this coming Friday.
Clouds hanging over the sector include increased capital requirements to meet regulatory guidelines and concerns over higher bond yields impacting the prices of debt and other securities on bank balance sheets. Meanwhile, banks are also adding to their reserves in anticipation of an economic downturn in a move that channels money away from their quarterly bottom lines.
Higher interest rates and a spike in bond price yields this week have weighed heavily on bank stocks and pressured the profits they make on loans compared to what they spend to maintain deposits in the form of interest payments. “The third quarter was another weak quarter for dealmaking in the U.S. as the threat of further rate rises persisted and we saw the usual summer slowdown in the months of July and August,” Phil Isom, global head of M&A and KPMG, said in a statement.
Wall Street analysts expect JPMorgan Chase to earn a third-quarter profit of $3.90 a share on revenue of $39.55 billion, according to FactSet consensus data. “We like JPM heading into the quarter due to expectations of increased market share in banking and higher-than-expected net interest income for 2023,” he said.
The bank is not likely to share any head-count reduction numbers until early next year, but it’ll likely provide a bit of color on the effort and how its businesses are faring in the choppy environment. Goldman Sachs earnings in spotlight amid noise around chief executive Goldman Sachs held the distinction as the only megabank with a positive performance in the third quarter, with a slim 0.3% gain.
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