America’s biggest banks kick off third-quarter earnings season on Tuesday, with investors watching how higher bond yields and a reviving deal pipeline shape the results.
According to analyst estimates, JPMorgan is expected to report earnings of about 5.94 dollars per share, up from 5.07 a year earlier, while Goldman Sachs is seen earning about 12.44 dollars per share versus 12.25 last year. Citigroup and Wells Fargo are also projected to post year-on-year gains.
A major theme this quarter is the 10-year Treasury yield, which has climbed to about 5.35 percent, its highest in more than two decades. Higher yields can widen banks’ lending margins but also squeeze borrowers and weigh on credit quality.
Investors will also listen closely for what executives say about investment banking, where merger and capital-markets activity has shown signs of life after a long slump. Outlooks for trading revenue and loan growth will be parsed for clues about the economy’s direction.
With markets on edge about inflation and the path of interest rates, the banks’ commentary may matter as much as the numbers when results land this week.
Beyond the headline numbers, analysts will focus on trading desks, which have benefited from market volatility, and on net interest income — the core profit engine that higher yields can either help or hurt, depending on how fast deposit costs rise.
The results arrive with stocks near record territory and investors increasingly divided over whether the economy can keep growing with borrowing costs this high. What bank chiefs say about credit quality, and about the health of the American consumer, will be scrutinized for hints of strain.
Dealmaking is the other variable to watch. After a long drought, merger announcements have picked up, and bankers are hoping the pipeline converts into fees. Any sign that the rebound is stalling would darken the outlook for the sector.
