Item 1 of 3 Exterior view of JPMorgan Chase headquarters in New York City, May 20, 2015. REUTERS/Mike Seeger/File Photo
(1/3) Exterior of JPMorgan Chase & Co. headquarters in New York City, May 20, 2015. REUTERS/Mike Seeger/File Photo Purchase License Rights, opens in a new tab
NEW YORK, April 10 (Reuters) – As the U.S. banking giant prepares to report a slightly lower first-quarter profit, investors are wondering how much revenue executives expect to increase in interest payments this year. is paying attention to.
JPMorgan Chase & Co. (JPM.N) opens in a new tab On Friday, analysts in an LSEG survey expected earnings per share (EPS) to likely decline 4% year over year. Citigroup (CN) opens in new tab and Wells Fargo are expected to decline 35% and 11%, respectively. Goldman Sachs (GS.N) opens in new tab is expected to fall 13% on Monday. Bank of America (BAC.N), opens new tab is likely to drop 18% on Tuesday, analysts say, while Morgan Stanley (MS.N), opens new tab is likely to drop 2%. is expected to announce a decline in
Analysts are considering how trends in U.S. interest rates will boost banks’ net interest income (NII), or the difference between the profits lenders earn on loans and the amount they pay on deposits. There is.
“This is the overarching theme this quarter and we will see upside in earnings,” said Kenneth Leung, research director at CFRA Research.
Banks have posted record profits in recent quarters after the Federal Reserve began raising interest rates in March 2022 to curb inflation. NII’s outlook is attracting attention as a barometer of future earnings.
Management’s comments this quarter will come under even more scrutiny as the market trims expectations that the Fed will cut interest rates three times this year, down from an earlier estimate of six. JPMorgan, Bank of America and Wells Fargo (WFC.N) could open a new tab, say Morgan Stanley analysts led by Betsy Grasek, as they benefit from higher long-term interest rates that boost NII. I wrote in my memo that there is. U.S. consumer prices rose more than expected in March, sending financial markets lower as Americans continued to pay more for gas and rental housing. We expect the Fed to postpone interest rate cuts until September.
“Given the possibility that the Fed’s rate cuts will likely be slower and narrower after the CPI, and that there may be a lag in NII changes, we’re a little more optimistic,” said Mike Mayo, an analyst at Wells Fargo. It will stop,” he said.
Rising interest rates could strain the finances of consumers who are increasingly behind on their loan payments, prompting lenders to set aside more funds to cover potential losses. Masu.
“Delinquencies may rise and consumer-driven growth may slow, but we expect it will have a significant impact on revenue,” said Chris Marinak, director of research at financial advisor Janney Montgomery Scott. I don’t expect that,” he said.
The bank, which serves both individual customers and businesses, performed slightly better in the first quarter than its rivals, which focus on Wall Street trading, which have struggled in recent quarters.
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So far in 2024, Citigroup stock is up 17% as of Wednesday’s close, Wells Fargo is up about 16% and JPMorgan is up nearly 15%, compared with about 11% for the S&P 500 Banks Index.
Globally, M&A fell to a 10-year low in 2023, but showed signs of recovery in the first quarter. Bankers are expressing more optimism about the recovery this year.
KBW analyst David Conrad said of the merger talks, “This quarter will be a very strong conversation for Wall Street banks.” “Capital market activity is increasing and moving in the right direction.”
A revival would boost earnings at Goldman Sachs and Morgan Stanley, whose profits rely heavily on investment banking revenue.
Grasek said the outlook for the deal will also be an important indicator.
JPMorgan, the largest U.S. financial institution, announced in February that first-quarter market revenue could fall by 5% to 10%. At Citigroup, investors are waiting for an update on Chief Executive Officer Jane Fraser’s growth strategy after she launched a sweeping reorganization in September. By the end of the first quarter, the company had laid off 5,000 employees.
“This is a time for progress,” Marinak said, expressing optimism about the bank’s prospects. “I don’t think the first year was very promising, but we’re done with that first year and I think there should be some progress.”
Leadership is also a focus at JPMorgan, with the board identifying a candidate to replace CEO Jamie Dimon, paving the way for an eventual leadership change at the nation’s largest bank. Become. Elsewhere, investors are keeping an eye on Wells Fargo (WFC.N)’s opening of a new bank. Making progress taboo to meet government demands to solve problems and reduce regulatory penalties, including asset caps that limit growth.
*LSEG means estimated value
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Reporting by Nupur Anand in New York. Editing: Lanan Nguyen, Richard Chan
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