Breaking News
LAST CHANCE for Cyber Monday SALE: Up to 54% off InvestingPro! Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

U.S. banks expected to report mixed Q3 results, iffy loan outlook

EconomyOct 07, 2021 09:12AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
3/3 © Reuters. FILE PHOTO: Customers use ATMs at a Citibank branch in the Jackson Heights neighborhood of New York City, U.S. October 11, 2020. Picture taken October 11, 2020. REUTERS/Nick Zieminski/File Photo 2/3

By David Henry

(Reuters) - The largest U.S. lenders are expected to report moderately higher third-quarter profits next week as pandemic-related accounting adjustments that had doubled their earnings earlier this year taper off and business starts to return to normal.

Analysts, on average, expect JPMorgan Chase & Co (NYSE:JPM), the country's largest lender, to report slightly lower profits compared with the year-ago period when it kicks off earnings season on Wednesday, according to I/B/E/S data from Refinitiv.

Next Thursday, Citigroup Inc (NYSE:C) and Morgan Stanley (NYSE:MS) are both expected to report a 15% rise in profits, while Bank of America Corp (NYSE:BAC) is expected to be up about 35%. Wells Fargo (NYSE:WFC) & Co, which also reports Thursday, is expected to show a massive 100%-plus jump on a quarter in which results were depressed by unusual expenses.

Goldman Group Inc will cap the week on Friday, with profits expected to be up slightly.

Stock buybacks will provide a lift to earnings-per-share in the quarter and coming periods.

Investment banking divisions should deliver spectacular gains thanks to a record-breaking boom in takeovers, while a decline in fixed-income trading revenue will be partially offset by strong equity volumes.

But analysts say the focus will be on whether net interest revenue, which provides more than half of banking industry revenue but has been stagnant in recent quarters, is set to rise in coming months on higher interest rates and new loan demand from businesses and consumers.

"That's going to be the question. It is the heart of the business for everybody," said Gerard Cassidy, analyst Gerard Cassidy of RBC Capital Markets.

Some banks could show they are earning more interest because they started investing more of their excess cash in securities, such as 5-year U.S. Treasury notes which were recently yielding 1%, three times as much as at the start of the year.

Analysts will also look for signs that commercial and industrial borrowing has stopped declining. They expect an increase once COVID-hampered supply chains recover and allow businesses to build inventories that need bank financing. Many businesses and consumers paid down loans during the pandemic.

Bank of America's 35% expected jump in profits is likely to be driven by smaller provisions for loan losses and a rise in net interest income. Its results may suggest its strategy of investing its excess cash in government and mortgage-backed securities has paid off.

Unlike earlier this year, banks will benefit only marginally this quarter from releasing reserves for pandemic-related loan losses that did not materialize. Banks have already released 60% of a combined $50 billion of reserves they had put aside and will likely release only $5 billion more this quarter, according to Goldman Sachs (NYSE:GS) analyst Richard Ramsden.

He expects Wells Fargo and Citigroup will feel the greatest benefit.

Results for those two banks could also be influenced by how much they are having to spend to comply with orders from regulators to improve their controls.

Wells Fargo's year-earlier profits were hurt by costs for making amends to customers for wrongs.


Takeover advisory fees at the big investment banks will be up by 80% on average, Cassidy said, adding that he also expects a lift from equity underwriting.

Trading revenue, on the other hand, is expected to be down about 10% on average because fixed income markets, which drove record trading volumes last year, have settled down to more normal levels.

JPMorgan third-quarter net income is expected to decline about 3% from a year earlier on lower trading revenue and higher expenses, according to the average analyst estimate.

Results from investment banking giant and money manager Morgan Stanley are expected to rise on higher takeover advisory fees, stronger equities trading revenue and more wealth management fees.

Goldman Sachs is also expected to benefit from higher mergers and acquisitions fees amid the biggest global deals boom on record.

Most banks will report that expenses increased more than revenue, according to Ramsden. Keeping up with competitors continues to require more spending on technology. Analysts are also wary that banks have to pay more to attract employees.

U.S. banks expected to report mixed Q3 results, iffy loan outlook

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email