US Banks Expect Q1 Earnings Dip as Ukraine Conflict Chills Investment

The first quarter was unkind to the nation’s banks.

When the data from January through March is in, big banks in the United States expect to see a dramatic dip in earnings compared to the same period one year ago, Reuters reported.

Now just a memory, Q1 of 2021 saw an unusual number of deal and trades and cash reserved for potential loan losses.

Refinitiv I/B/E/S, the global provider of financial markets data, reported net income for the six largest U.S. banks will dip by more than one third compared to a year ago.

Investment banking revenues have been at a standstill since Russia invaded Ukraine in February.

Christopher McGratty, managing director of Keefe, Bruyette & Woods, the New York-based investment banking firm, told the news outlet that estimated revenue declines of 18% in trading and 36% in investment banking have been the biggest stumbling block to profitability.

“Last year was massive for capital markets at the banks, so comparisons are hard,” McGratty said.

In a report, Jason Goldberg, an analyst at Barclays, wrote the loses in Q1 could be viewed as short-term pain with the potential for long-term gain.

It hasn’t helped that competition between traditional financial institutions and FinTechs continues to heat up.

Read more: JPMorgan’s Dimon: Competition Between Banks and FinTechs Is ‘Intensifying’

In his annual letter to shareholders, Jamie Dimon, CEO of JPMorgan Chase, wrote: “The growing competition to banks from each other, shadow banks, FinTechs and large technology companies is intensifying and clearly contributing to the diminishing role of banks and public companies in the United States and the global financial system.”

The letter said the world’s economy will slow, in part due to the economic sanctions on Russia and noted that “over time” his own bank could lose about $1 billion due to the ongoing conflict in the region.