JPMorgan, Citi kick off big bank reporting season as expectations remain tempered amid economic headwinds: Q2 Earnings Previews – Bank of America (NYSE:BAC), Bank of New York Mellon (NYSE:BK)

The second-quarter reporting season is starting in earnest with the release of earnings reports from the largest banks. The question remains whether these companies will set positive momentum and reignite buying interest in the market.

Earnings growth will go hand in hand with the broader market: With most of the S&P 500 companies reporting earnings in the next two weeks from the financial sector, their earnings could have a big impact on the market. Among the financial sectors, those operating in insurance and capital markets are expected to contribute significantly to the sector’s year-over-year earnings growth, financial data analysis firm FactSet said in its weekly earnings report.

The financial sector per se is expected to post a 4.3% year-over-year profit increase, which is lower than the 8.8% increase predicted for the S&P 500 as a group. In the capital markets industry, investment banking and brokerage could post a 53% profit increase. Financial exchanges and data and asset management and depository banks could post a 10% increase each.

See also: The best financial services stocks right now

Key metrics to look out for: The strength of the fundamental borrowing and lending business depends on prevailing interest rates. The federal funds rate, the benchmark against which all interest rates are set, remained at a 22-year high of 5.25%-5.50%.

“The interest rate environment remained slightly negative in the second quarter, although slightly less than in the first,” he said. Sean Ryanvice president of specialty banking and finance at FactSet. The analyst said other comprehensive income could have seen further losses due to a 17 basis point rise in the 10-year Treasury yield in the June quarter.

Reserves could rise, weighing on earnings, as Fed results released in late June showed the loss rate on commercial and industrial loans could rise to 8.1% in 2024 from 6.7% last year.

Slow credit growth may have dampened net interest income to some extent, he said, adding that “the bottoming out of net interest margins is still ongoing, with another group of banks likely to see their first increases in this cycle, and
more likely to lead to future increases.”

Non-interest revenues could remain mixed, Factset said. WTW’s Quarterly Deal Performance Monitor showed the North American M&A market remains challenging, with acquirers underperforming their regional index by -7.7%, marking the sixth consecutive quarter in which acquirers have lagged industry peers.

FactSet said mortgage banking benefited from higher lending activity, including refinancing, despite slightly higher interest rates. Wealth and asset management benefited from a 3.9% gain by the S&P 500 in the quarter, although that was smaller than the 10.2% gain in the first quarter.

Results schedule:

Friday:

JPMorgan Chase & Co. JPM
Citigroup Inc. C
Wells Fargo & Company WFC
Bank of New York Mellon Corporation BK

Monday:

Goldman Sachs Group, Inc. GS

Tuesday:

Bank of America Corporation BAC
Morgan Stanley MS

Here is a summary of expectations for large banks:

	Second Quarter Earnings Per Share Consensus	Every year Change	Amount per quarter Change	Q2 Revenue Consensus	Every year Change	Amount per quarter Change
JPMorgan	4.19 PLN	(-11.8%)	(-5.6%)	42.34 billion dollars	(-0.10%)	(-0.5%)
City	$1.39	+4.5%	(-12.20%)	20.07 billion dollars	+3.3%	(-4.9%)
Well Fargo	$1.29	+3.2%	+7.5%	$20.29 billion	(-1.2%)	(-2.7%)
Golden	8.36 PLN	+171.4%	(-27.8%)	$12.47 billion	+14.4%	(-12.2%)
BofA	80 cents	(-9.1%)	(-3.6%)	$25.22 billion	almost flat	(-2.9%)
Morgan Stanley	$1.65	+33.1%	(-18.3%)	$14.31 billion	+9.4%	(-5.5%)

Financial stock movements: This Invesco KBW Bank ETF KBWBThe exchange-traded fund, which tracks the KBW Bank index, gained just 0.5% in the second quarter, underperforming the broader market. The ETF is up about 15.3% in the year-to-date period.

The ETF was up 0.64% to $56.20 in pre-market trading on Friday, according to data from Benzinga Pro.

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