The fourth-quarter earnings season kicked off in earnest Monday, when Citigroup Inc. C, +3.08% became the first of the big U.S. banks to put forward its quarterly results.
JPMorgan Chase & Co. JPM, +0.70% and Wells Fargo & Co. WFC, +0.42% are scheduled to report their results on Tuesday, followed by Goldman Sachs Group Inc. GS, +0.38% and Bank of America Corp. BAC, +0.79% on Wednesday and Morgan Stanley MS, +0.55% on Thursday.
Analysts are expecting a decent set of numbers, given an economy that seems in good shape based on holiday retail sales and employment numbers, subdued inflation and a more dovish Federal Reserve. But market volatility, political uncertainty and global tensions have created an uncertain backdrop that might prevent the numbers from finally lighting a fire under bank stocks, which have declined across the board for the past year.
“Compared with the challenges of Brexit and growth in EMEA, and the weakness in emerging markets, the U.S. is still experiencing a better economic and growth profile,” said Mark Doctoroff, co-head of MUFG’s global financial institutions group. “Risks to this continuing are obvious — prolonged government shutdown, credit weakness and deterioration in the borderline investment grade/non-investment-grade universe, and haphazard market closure due to more extreme volatility.”
Analysts are expecting faster loan growth compared with recent quarters, based on Federal Reserve data, with commercial and industrial loans expected to lead the pack. Net interest margins (NIMs) are expected to benefit from higher short-term rates, while net interest income (NII) is expected to be boosted by the uptick in loan growth.
“Overall, we expect accelerating loan growth versus recent quarters, stable to slightly higher NIMs, low single digit quarter on quarter NII growth, stable credit quality, and challenging capital markets income,” UBS analysts led by Saul Martinez wrote in a note.