Major banks are set to kick off the second-quarter earnings season this week. Investors will look at the big bank’s earnings closely as they reassess the impact of the expected economic slowdown in the upcoming months.

This year, the market has witnessed a broad-based sell-off due to investors’ concerns over surging inflation, rising interest rates, and a potential recession. The S&P 500 posted its worst first-half in over five decades. However, earnings guidance has remained mostly unchanged.

According to Refintiv data, analysts expect the S&P 500 earnings for the second quarter to grow by 5.6%, down from an expected 6.8% at the start of April, marking the slowest quarterly growth since the fourth quarter of 2020. The SPDR S&P Bank ETF (KBE) has lost 17.8% year-to-date.

“Right now, it’s kind of sunny, things are doing fine. Everyone thinks the Fed can handle this,” said JPM CEO Jamie Dimon at a Bernstein conference. “That hurricane is right out there down the road coming our way. We just don’t know if it’s a minor one or superstorm Sandy. You better brace yourself,” he added.

On June 23, 2022, the Federal Reserve said that all major banks had enough reserves to weather a severe economic contraction.

Banks’ net interest income and net interest margins are expected to get a boost from the interest rate hikes. However, banks’ overall results are expected to remain lackluster compared to the year-ago period as loan loss reserve releases primarily drove the earnings last year.

Analysts will watch the banks’ mortgage business closely as the 30-year fixed-rate mortgage rates dropped to 5.30% from 5.70%, posting its most significant decline since December 2008 due to rising recession concerns.

Let’s discuss what to expect from the upcoming earnings reports of JPMorgan Chase & Co. (JPM), Morgan Stanley (MS), Wells Fargo & Company (WFC), and Citigroup Inc. (C).

JPMorgan Chase & Co. (JPM)

JPM is a financial holding company engaged in investment banking, financial services, and asset management. It operates in the consumer and community bank, corporate and investment bank, and commercial and asset management segments.

JPM’s net revenues increased 4% sequentially to $31.59 billion for the first quarter ended March 31, 2022. The company’s net income declined 20.3% sequentially and 42% year-over-year to $8.28 billion. Also, its EPS came in at $2.63, representing a decrease of 41.5% year-over-year and 21% sequentially.

Analysts expect JPM’s EPS for the quarter ended June 30, 2022, to decline 22.5% year-over-year to $2.93. Its revenue for the quarter ending June 30, 2022, is expected to increase 6.7% year-over-year to $31.97 billion. It surpassed Street EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has lost 32.8% to close the last trading session at $114.36.

JPM’s POWR Ratings reflect solid prospects. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has a B grade for Momentum and Sentiment. It is ranked first out of 11 stocks in the Money Center Banks industry. Click here to see the additional ratings of JPM for Growth, Value, Stability, and Quality.

Morgan Stanley (MS)

MS is a global financial services company. The company, through its subsidiaries, provides a range of investment banking, securities, wealth management, and institutional management services. Its segments include Institutional Securities, Wealth Management, and Investment Management.

MS’ net revenues increased 2% sequentially to $14.80 billion for the first quarter ended March 31, 2022. The company’s noninterest expenses declined 3% year-over-year to $10.15 billion. Its net income declined 11% year-over-year to $3.66 billion. In addition, its EPS decreased 8% year-over-year to $2.02.

Analysts expect MS’ EPS and revenue for the quarter ended June 30, 2022, to decline 14.7% and 8.7% year-over-year to $1.61 and $13.48 billion, respectively. It surpassed consensus EPS estimates in each of the trailing four quarters. Over the past six months, the stock has lost 26.2% to close the last trading session at $76.73.

MS’ POWR Ratings reflect its solid prospects. It has a B grade for Momentum and Stability. Within the Investment Brokerage industry, it is ranked #15 out of 24 stocks.

To see the other ratings of MS for Growth, Value, Sentiment, and Quality, click here.

Wells Fargo & Company (WFC)

Financial services company WFC provides diversified banking, consumer and commercial finance, investment, and mortgage products and services. It operates through four segments: consumer lending, retail banking, corporate and investment banking, and wealth and investment management.

For the fiscal first quarter that ended March 31, 2022, WFC’s total revenue declined 5% year-over-year to $17.59 billion. The company’s noninterest expense decreased 0.8% year-over-year to $13.87 billion. Its net income fell 20.8% year-over-year to $3.67 billion. In addition, its average loans and average deposits increased 2.8% and 5% year-over-year to $1,464.10 billion.

For the quarter ended June 30, 2022, WFC’s EPS and revenue are expected to decline 37.7% and 13% year-over-year to $0.86 and $17.63 billion, respectively. It surpassed Street EPS estimates in each of the trailing four quarters. Over the past six months, the stock has lost 26.6% to close the last trading session at $40.18.

WFC’s POWR Ratings reflect this promising outlook. It has a B grade for Value and Momentum.

It is ranked #2 in the Money Center Banks industry. To see the other ratings of Growth, Stability, Sentiment, and Quality, click here.

Citigroup Inc. (C)

C is a diversified financial services holding company that provides various financial products and services to consumers, corporations, governments, and institutions. The company operates in two segments, Global Consumer Banking (GCB) and Institutional Clients Group (ICG).

C’s total revenues increased 13% sequentially to $19.18 billion for the first quarter ended March 31, 2022. The company’s total operating expenses declined 3% sequentially to $13.16 billion. Its net income fell 46% year-over-year but increased 36% sequentially to $4.30 billion.

Analysts expect C’s EPS for the quarter ended June 30, 2022, to decline 42.3% year-over-year to $1.64, while its revenue is expected to increase 4.9% year-over-year to $18.33 billion. It surpassed consensus EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has lost 35.3% to close the last trading session at $46.82.

C’s POWR Ratings reflect its solid prospects. It has a B grade for Value and Momentum.

Within the same industry, it is ranked #3. Click here to see the other ratings of C for Growth, Stability, Sentiment, and Quality.

JPM shares fell $0.76 (-0.66%) in premarket trading Monday. Year-to-date, JPM has declined -26.16%, versus a -17.56% rise in the benchmark S&P 500 index during the same period.

About the Author: Dipanjan Banchur

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets. More...

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