From the Wall Street Journal, April 10:
As bank-earnings season begins Friday with JPMorgan, investors care more about the outlook than prior results
There’s a difference between a pause in the fighting and a cease-fire. When it comes to the trade war, that really matters for the biggest U.S. banks.
President Trump’s about-face on tariffs Wednesday brought the big banks instant relief after days of intense pain—shares of the big six U.S. banks all soared.
While the move was understandable, banks aren’t out of the woods yet. Retaliatory tariffs remain in place against China, the U.S.’s third-largest trading partner. Those could still cause economic dislocation and possibly inflation, which might keep the Federal Reserve in check for some time. Other tariffs are on hold, but only for 90 days.
So investors will still be on edge Friday when banks’ earnings season kicks off. Bellwether JPMorgan Chase leads the charge on first-quarter results, and chief Jamie Dimon’s economic and business commentary will hold more weight than ever. Wells Fargo and Morgan Stanley also report that day, while the following week brings results from Bank of America, Citigroup and Goldman Sachs.
Generally, the first-quarter results will be noted but won’t matter much. Investors want to know what the outlook is, and if it is even possible to gauge what comes next.
Recession risks are rising but are less acute than when the world was being subjected to the full extent of Trump’s tariffs. This means concerns remain around banks’ credit risks, or the possibility lenders won’t get repaid in full on loans and bondholdings.
Market risks, known and unknown, haven’t really diminished, either. Sudden shocks have a way of causing jarring blowups in unforeseen ways, such as the collapse of hedge fund Long-Term Capital Management after Russia’s surprise debt default in 1998.
Market volatility can do wonders for revenue on a big bank’s trading desk, until it gets so out of hand that liquidity dries up.
Questions abound about borrowers’ behavior, both companies and consumers. If they’re getting nervous and drawing down revolving credit lines, that could increase lenders’ credit risks. If more are paying off their loans early and pulling back on large capital expenditures, that could weigh on banks’ revenue.
New hazards are resurfacing almost daily. Two years ago, the banking industry’s biggest problem was interest-rate risk. That seemed to have subsided. But it is surging again, as Treasury yields have jumped sharply, for reasons that still aren’t entirely clear.
Ten-year Treasury yields were hanging in around 4.35% during Wednesday’s furious stock rally. They had briefly dipped below 4% late last week.
In 2022, the values of lenders’ fixed-rate assets, including Treasurys and mortgage bonds, fell hard, causing yields to spiral higher. A few large regional banks failed the next year as a result, and depositors fled many others for the perceived safety of too-big-to-fail banks such as JPMorgan.
Ultimately, each bank will have its own idiosyncratic risks, advantages and insights. For instance, almost half of Citigroup’s revenue is international.
Beyond what bank executives say, investors will be monitoring how they actually handle potential future losses.
Economic forecasts are among the inputs in the mathematical models banks use to calculate the credit-loss numbers in their earnings reports. How and whether banks try to get ahead of any tariff-related fallout will reflect just how stressed they believe their clients are likely to be.
This won’t be clear-cut. Some of the losses banks anticipate currently will end up being a second-quarter event for reporting purposes. The reason has to do with a calendar quirk and some accounting-rule minutiae....
....MUCH MORE
There will be a lot of data, information and opinion to sort through. That's the reason for the banking babble:
April 6"Singapore bank stocks battered with STI down 8.1% at midday, HK sinks 10.7% in Asia market rout"
As noted in the intro to News You Can Use: "Using Machine Learning to Measure CEO Depression":
With earnings season kicking off we have a natural experiment before us. And we will be paying particular attention to the bankers....
Banks, especially international banks, are among the greatest beneficiaries of globalization and are at risk from any changes that they haven't shaped and molded. JPMorgan's earnings call is scheduled for Friday, April 11, 2025 as is Wells Fargo's. Bank of America reports on April 15.
