Earnings: Banking Sector Under Pressure

Earnings: Banking Sector Under Pressure


Banks are the first major sector to release its first quarter results in the next few days on Wall Street, starting with JP Morgan and Wells Fargo this Friday before the opening. After a rather strong fourth quarter of 2018, 2019 started with an increase in risks for this cyclical sector. The Fed’s pause in its rate hike cycle, the partial shutdown of the US administration, and the fears of a trade war have weighed in particular on the banks’ market activities.

Thus, analysts expect a decline in profits of the financial sector, 3.8% lower over one year compared to the same period of 2018, according to the consensus compiled by Factset. This decline is however lower than that of the S&P 500 which is expected at -4.2%. On the other hand, financial revenues should rise by 4.8% (versus +4.7% for the S&P 500) according to Factset.

Upcoming Bank Earnings

– Friday, April 12 before the opening of Wall Street: JP Morgan Chase and Wells Fargo

– Monday, April 15 before the opening: Citigroup and Goldman Sachs

– Tuesday April 16 before the opening: Bank of America

– Wednesday, April 17 before opening: Morgan Stanley

The four largest US banks by the amount of assets are in the order JP Morgan, Bank of America, Citigroup and Wells Fargo, followed by Goldman Sachs and Morgan Stanley, which essentially remain investment and market banks.

Banks’ market activities (commission sources) are expected to fall in the first quarter, despite the rise in the equity and bond markets. In fact, these performances occurred in low volumes and customer activity has fallen, particularly due to the partial shutdown of the US administration at the beginning of the year, and more generally because of the economic uncertainties that do not encourage customers to act.

Leaders JP Morgan Chase and Citigroup have already warned of a decline in trading income earlier this year.

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