Looking Ahead At Bank Earnings Season

The biggest of the big banks are slated to report earnings beginning this week. The results may be tepid, which, as Reuters noted, can be a blanket on the “Trump rally” of old. That would add, perhaps negatively, to muted hopes for legislation in the near term that may boost margins.

Stocks were basically flat to start the week by the end of Monday’s )April 10) trading as bank shares were down, individually, a few dozen basis points.

On tap for the end of the week is a slew of bigger lenders including JPMorgan Chase, Wells Fargo and Citigroup. Later in the month those firms are joined by Goldman Sachs, Morgan Stanley and others, said the newswire. The total increase in net income being projected by the Street comes in for the first quarter for the half-dozen biggest lenders at 4.7 percent. That comes off an easy hurdle from last year, where the banking system saw a dearth of capital markets activity. Deal making was slow this year, which also could hit results in M&A segments.

Another warning sign that all might not be rosy in the financial services sector may come in a drag on loan growth, reported the newswire, with rising interest rates impacting consumer enthusiasm for refinancing. Outstanding loans declined in February of this year, an event that has not been seen in three years as firms borrowed less and homeowners scaled back mortgage refinancing activity. As has been well-documented, the Fed boosted its benchmark interest rate by 25 basis points this past month.  But the yield curve has flattened, meaning that banks’ net interest margins may not be as robust as some had hoped. The Trump rally, which began at the time of the election last year and peaked at the beginning of March, saw the KBW stock index jump 32 percent but backed off 6 percent last month.