Insightful Word
  • Investing
  • Stock
  • Economy
  • Politics
  • Investing
  • Stock
  • Economy
  • Politics
No Result
View All Result
Insightful Word
No Result
View All Result
Home Investing

Will banks deliver? Earnings report to reveal true picture of US lending sector

admin by admin
January 13, 2025
in Investing
0
Will banks deliver? Earnings report to reveal true picture of US lending sector
0
SHARES
3
VIEWS
Share on FacebookShare on Twitter

Investors’ buoyant outlook on US banks, which propelled stocks higher at the close of 2024, is about to face a rigorous test as earnings season kicks off this week.

The performance reports of the largest US lenders will reveal whether the recent rally is sustainable or if the sector is poised for a more turbulent year.

Post-election rally and the need to justify fundamentals

The stocks of major US banks had rallied following Donald Trump’s election victory, driven by expectations of deregulation and a more lenient approach to corporate mergers.

However, as these banks prepare to report their fourth-quarter and full-year 2024 results this Wednesday and Thursday, investors are now looking for concrete evidence to back up these optimistic valuations.

“Any sector, any stock that comes a long way in a short period of time, had better deliver the fundamentals to justify that type of move,” Interactive Brokers chief strategist Steve Sosnick told Yahoo Finance.

Record profits expected, but quarterly dips anticipated

JPMorgan Chase, the nation’s largest bank, is expected to announce its second consecutive year of record profits, with fourth-quarter earnings showing an increase compared to the same period last year.

Analysts also anticipate that Bank of America, Wells Fargo, Citigroup, Goldman Sachs, and Morgan Stanley will report profit increases for both 2024 and the fourth quarter, compared to the same periods in 2023.

However, these positive results are expected to be tempered by a decline in fourth-quarter profits compared to the third quarter of 2024.

Focus shifts to 2025 outlook amid economic uncertainty

The primary focus of investors will likely be the banks’ outlooks for the coming year, particularly given the volatility surrounding inflation, the US economy, the policies of the incoming administration, and future interest rate decisions.

A strong December jobs report, signs of persistent inflation, and potential shifts in trade policy under the new administration have led many Wall Street strategists to believe that the Federal Reserve will hold off on further interest rate cuts for now, and that the door has been cracked open for possible rate hikes in 2025.

A bullish scenario for banks, but risks remain

There is an argument to be made for how banks will fare this year, particularly after a full percentage point of rate cuts from the Fed in 2024.

Interest rates, while still high enough for banks to earn robust lending margins, have also come down far enough to give some bank borrowers a measure of relief.

Furthermore, dealmaking is picking up, with companies issuing debt at a record pace and initial public offerings (IPOs) increasing, while the Trump administration is expected to scrap a set of proposed capital rules that would have limited future profits.

“I don’t want to be like Pollyanna-ish, you know, there are certainly some wild cards out there but the outlook overall is pretty good,” Piper Sandler bank analyst Scott Siefers told Yahoo Finance.

The “wild card” of interest rates

The direction of interest rates remains a key uncertainty, and a major wild card for the year ahead, Siefers noted.

Even as the Fed has reduced its benchmark rate, longer-term rates have increased due to concerns about inflationary pressures.

These higher long-term rates could have a double-edged effect on banks, potentially creating higher unrealized losses on their bond portfolios and decreasing fixed income trading revenue, while also posing risks for corporate customers.

Conversely, these higher rates could also allow banks to charge more for their loans.

“We make a lot of money if that happens,” PNC Financial Services Group CEO Bill Demchak said at a Goldman Sachs conference last month.

However, Demchak also expressed concern that such an outcome could hurt the economy.

Net interest income key to bank performance

Bank analyst Mike Mayo predicts that if long-term, 10-year rates do not exceed 5% to 6%, a key revenue source known as net interest income will “inflect” across most US banks after the first quarter.

Net interest income represents the difference between what banks charge on their loans and pay on their deposits.

“Choo choo, the train is taking off but mind the gap so you don’t break a leg or anything,” Mayo, who works for Wells Fargo, told Yahoo Finance, underscoring both the potential and the risks ahead for the banking sector.

The post Will banks deliver? Earnings report to reveal true picture of US lending sector appeared first on Invezz

Previous Post

HCLTech misses Q3 revenue targets, narrows growth forecast amid tech spending slowdown

Next Post

Trump’s inaugural crypto ball: are $100K tickets worth the buzz?

admin

admin

Next Post
Trump’s inaugural crypto ball: are $100K tickets worth the buzz?

Trump’s inaugural crypto ball: are $100K tickets worth the buzz?

Trending News

JPMorgan earnings beat by $0.38, revenue topped estimates

JPMorgan earnings beat by $0.38, revenue topped estimates

October 11, 2024
PSEG tops Q3 earnings and revenue estimates amid improved energy margins

PSEG tops Q3 earnings and revenue estimates amid improved energy margins

November 4, 2024
How billionaire Caltagirone could influence Italy’s banking M&A wave

How billionaire Caltagirone could influence Italy’s banking M&A wave

April 24, 2025
Subscribe to Insightful Word


    Recent News

    ARB eyes recovery as Arbitrum taps agentic DeFi revolution with $1M grant

    ARB eyes recovery as Arbitrum taps agentic DeFi revolution with $1M grant

    June 5, 2025
    Ripple releases $2.18B in XRP, price dips 2%

    Ripple releases $2.18B in XRP, price dips 2%

    June 5, 2025
    Nintendo Switch 2 launch sees shortages as 2.2M vie for units in Japan

    Nintendo Switch 2 launch sees shortages as 2.2M vie for units in Japan

    June 5, 2025
    Why Bank of America sees 13% upside on Roblox (RBLX)

    Why Bank of America sees 13% upside on Roblox (RBLX)

    June 5, 2025

    Recent News

    ARB eyes recovery as Arbitrum taps agentic DeFi revolution with $1M grant

    ARB eyes recovery as Arbitrum taps agentic DeFi revolution with $1M grant

    June 5, 2025
    Ripple releases $2.18B in XRP, price dips 2%

    Ripple releases $2.18B in XRP, price dips 2%

    June 5, 2025

    Latest News

    • ARB eyes recovery as Arbitrum taps agentic DeFi revolution with $1M grant
    • Ripple releases $2.18B in XRP, price dips 2%
    • Nintendo Switch 2 launch sees shortages as 2.2M vie for units in Japan

    About Insightful Word

    • Contacts
    • Cookie Notice
    • Privacy Policy
    • Terms of Service
    • Trading tools
    • Contacts
    • Cookie Notice
    • Privacy Policy
    • Terms of Service
    • Trading tools

    Copyright © 2025 Insightfulword.com. All Rights Reserved.

    No Result
    View All Result
    • Investing
    • Stock
    • Economy
    • Politics

    Copyright © 2025 Insightfulword.com. All Rights Reserved.