US banks 3Q earnings preview: What to expect
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Loading... - Bart Anker
- 04 Oct 2024
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The third-quarter earnings season for US banks is set to kick off on October 11, 2024, with JPMorgan and Wells Fargo leading the pack. The financial sector has been performing well year-to-date, with the SPDR Financial Select Sector exchange-traded fund (ETF) up 19.4% versus the broader S&P 500's 20.4%. However, expectations are for US bank earnings to contract over subsequent quarters due to the Federal Reserve's rate-cutting cycle, which could weigh on net interest income.
For JPMorgan, revenue is expected to edge higher year-on-year by 2.4% to $41.7 billion, while earnings per share (EPS) is expected to be down 11% year-on-year. In the previous quarter, JPMorgan saw a 52% surge in investment banking fees and a 21% jump in equities trading revenue, but this was weighed against a higher-than-expected build-up in credit loss provisions.
Banks' net interest income is projected to contract over the coming quarters, and traders will be watching for any significant pick-up in loan demand to be assured that the bank's net interest income will come off at a more gradual pace. Credit loss provisions will also offer more clues on the health of the US economy, and any guidance from management will be closely watched.
The recovery in investment and banking activities is expected to continue, driven by the prevailing risk-on environment in Wall Street. However, with the giant share of the banks' income still revolving around net interest income, sentiments will remain highly sensitive to any guidance on how interest rate cuts may impact this portion ahead.
From a technical analysis perspective, JPMorgan's share price has been struggling lately, and a crucial support confluence is currently being tested at the $204.39 level. Any failure for the support confluence to hold could call for a retracement towards the $191-$195 range, where its 200-day moving average stands. On the upside, a move in share price back above its $212.95 level could signal buyers taking on greater control.
Overall, the third-quarter earnings season for US banks is expected to be closely watched, with investors looking for clues on the health of the US economy and the impact of interest rate cuts on bank earnings.
