The start of earnings season typically is marked by banks’ reports – and a slew of them report this week, clustered on Friday (Jan. 15).
That day, we’ll hear from marquee names in the sector, including J.P. Morgan Chase, Citigroup, Bank of America and Wells Fargo.
The numbers will tell a tale of revenues gleaned from Wall Street trading, loan loss reserves and net interest margins. Management commentary will touch on the state of the economy and consumer spending – and macro concerns, of course, will have ripple effects on consumer and business spending and borrowing.
We’ll see twin forces at work – economic data show that unemployment, though stubbornly high, is lower than it was coming into the fourth quarter. Spending seems to have been robust, and there is evidence that stimulus check recipients have been inclined to save those payments or pay down debt – which leads, down the road, to a healthier consumer (and, for the banks, a heftier deposit base).
In other words, we’re seeing at least some traction from efforts to move beyond the direst of headwinds caused by the pandemic earlier this year. For bank results, at least viewed year over year, the fall-offs in top and bottom lines will be steep; it may be more revealing to look at sequential results and see what’s continued, or what’s changed, since the third quarter.
What’s most apparent in terms of changes with the fourth quarter in the rearview mirror: Vaccines are on the way toward mass distribution, and that may smooth the way toward business reopenings, as well as a ramp-up in spending and in tackling debt. The credit picture could brighten, and banks could release loan loss reserves that had built up into the year.
And there’s another overarching trend that bears scrutiny: the continued rise of mobile banking, which has been a hallmark of all banks’ earnings reports as users eschew the in-person branch experience in favor of financial life lived digitally.
In terms of the headline numbers and what to expect, see below for a guide, bank by bank (consensus data is sourced from investing.com).
There will, of course, be other bank earnings as the fourth-quarter reporting season wears on, and we’ll preview other names as their own reports draw closer. But for now, here’s what’s on tap for this week…
JPMorgan
Analysts are looking for $28.6 billion in top line, with $2.58 in earnings.
A rebound in consumer spending and better loan loss reserve data were hallmarks of the bank’s results back in the fall, as profiled in this space. To get a sense of how much better the credit picture looked, consider the fact that there was a $611 million provision in the quarter, where in the second quarter that tally was $10.5 billion. Net charge-offs also declined. Deposits were up mid single-digit percentage points, and mobile customer count was up 10 percent.
Citigroup
The consensus is for $1.32 in earnings and $16.7 billion in revenues.
If past is prologue, as they say, Citi may point toward continued stabilization, where credit losses declined in the third quarter (to $1.9 billion from an earlier $2.2 billion). But card spending was down, and that pressure might continue. As was seen with other banks, Citi has pointed to mobile traction, while end-of-period deposits in the third quarter were up by 16 percent year over year.
Wells Fargo
Analysts see the bank’s earnings at 58 cents on $18.1 billion in consolidated top line. Wells, as is well-known, has been navigating the challenges of the fallout from a series of scandals over the past few years. But similar to its banking brethren, declining sequential chargeoffs have been in evidence in recent results. And consumer spending remains on an upswing, where in the third quarter card fees rose to $912 million in the third period, up from $797 million in the second quarter. The bank said that was predominantly due to increased consumer spending – and debit spending was up 11 percent year on year.
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