Three Issues to Watch in JPMorgan and Big Bank Earnings

what happened

According to the Wall Street Journal, JPMorgan Chase, Goldman Sachs, Citigroup and Wells Fargo will open the banks’ third-quarter earnings season on Tuesday. Bank stocks have endured a difficult few months: bond-market moves and inflation worries weighed on revenue expectations, higher rates raised concerns about asset values, and the popularity of Meta’s Muse AI bot fueled fears that artificial intelligence could trigger a bank run.

The KBW Nasdaq Bank Index has fallen 8% over the past three months, while the S&P 500 has gained more than 3%. Bankers and analysts nevertheless say their operations have remained fairly stable. Barclays analyst Jason Goldberg wrote that the recent weakness in bank shares reflected fear more than fundamentals.

Investors will assess the effect of interest rates, investment-banking revenue and expenses. Higher rates currently let banks charge more for loans, but further increases could produce losses in bond portfolios, curb new lending and reduce capacity for buybacks. Banks have also cautioned that trading divisions are unlikely to match the strong second quarter, while merger activity and IPOs have slowed again. Spending on in-house AI capabilities and cybersecurity will be another focus.

why it matters

The reports may help investors distinguish sector sentiment from the underlying performance of major banks. Guidance on rates, trading, mergers, IPOs and AI-related spending will be closely watched.

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