U.S. bank investors to focus on impact of higher rates, deals outlook in third-quarter earnings — SkimNews
Get the Finance newsletter
Daily finance — markets, central banks, M&A, the prints that move money. Free.
- KBW Bank Index slid 13% from its August peak and shed 6% in the third quarter as Treasury yields climbed to multidecade highs, even though analysts still expect the largest U.S. lenders' profits to rise up to 20% year-over-year.
- JPMorgan Chase, Goldman Sachs, Citigroup and Wells Fargo report Q3 results on Oct. 13, with Morgan Stanley and Bank of America following on Oct. 14.
- Bank of America CEO Brian Moynihan warned of at least a 10% drop in Q3 investment banking fees, while JPMorgan co-president Doug Petno projected investment banking fees and trading revenue rising by a "mid-to-high teens" percentage — a gap some analysts say could make retail-heavy banks look more attractive than pure investment banks.
- Yield-driven IPO postponements late in September — including smart-ring maker Oura and SoftBank-backed AI data center developer SB Energy — added to investor concern that higher rates are chilling capital markets activity.
- UBS analyst Erika Najarian told clients investors need reassurances that the capital markets pipeline remains robust, loan growth is on track, and any rise in deposit costs is contained; Angel Oak's Cheryl Pate said she does not expect drastic deposit-cost increases.
- Analysts do not expect a repeat of the unrealized securities portfolio losses that battered banks during the 2023 crisis, noting most lenders have trimmed portfolio duration since then.
- Morgan Stanley co-president Dan Simkowitz said the bank's investment banking pipeline looks robust and that companies remain mid-cycle in AI-related investment.
Why it matters: With the KBW Bank Index already down 13% from its August peak and BofA guiding to at least a 10% drop in investment banking fees, the Q3 prints will let investors judge whether the yield spike is curbing real activity or merely rattling sentiment. The BofA-JPMorgan divergence on deal-fee guidance makes Oct. 13 a stress test for whether retail-heavy banks outperform pure investment banks through the rest of the year.
Ask SkimNews
