Strong Bank Earnings Expected to Bolster Markets

Tuesday marks the unofficial start of the Q4 corporate earnings season, with several major US banks reporting to investors as they assess the economy and the impact of monetary policy.

Key Upcoming Bank Earnings

• JPMorgan's EPS is projected at $4.86, bolstered by its investment division, but there is concern about rising costs.
• Bank of America's forecast earnings of $0.96, driven by interest spreads.
• Wells Fargo's expected earnings of $1.67 amid scrutiny of US consumer resilience.
• Citigroup's anticipated earnings of $1.62 were supported by M&A activity last quarter.

Trading Income to Offset Net Interest Income Pressure

Major US banks are expected to report solid earnings in Q4, capping their stock price outperformance in 2025. A confluence of factors is expected to have supported bank income, including large volatility spikes that increased trading income and a pickup in lending as the Fed cut rates in the final quarter of the year. On average, banking income is expected to rise in the high single digits year-over-year (YOY), driven primarily by higher trading-desk fees and commissions. The expectation is that these factors will offset pressure on net interest income as the Fed lowers rates and flattens the yield curve. This means banks with greater exposure to investment (such as Citi and JPMorgan) could stand out relative to consumer-heavy banks (such as Wells Fargo and Bank of America).

Traders will also be closely watching bank earnings for crucial insight into the broader economy, as bank income is expected to benefit from a healthy economy. But that could be marred by higher loan-loss provisions if executives fear an economic downturn. Focus will also be on charge-off and delinquency rates, as investors review consumer credit data for signs of economic stress. Management commentary on credit trends will be top of mind for many traders as they evaluate the tone of the outlook for the financial industry.

The Major Bank Earnings

JPMorgan starts things off, reporting earnings before the market opens on Tuesday. The consensus is for a modest increase in EPS to $4.86 from $4.81 a year ago, with revenue rising 8.1% to $46.3B. Markets will be looking at CEO Jamie Dimon's commentary on the US economy. The focus will likely be on the bank's investment arm, which is expected to generate higher income amid increased market volatility. The company's share price dipped late last year after executives admitted expenses would rise this year, so traders will be interested in greater clarity on this point.

Bank of America reports earnings before the market opens on Wednesday, with analyst consensus pointing to a solid increase to $0.96 from $0.82 in the prior year. Revenue is expected to expand 9.5% to $27.7 billion. The bank is expected to benefit from higher net interest income after CEO Brian Moynihan said last month that revenue would rise, while investment banking fees were projected to remain flat.

Wells Fargo will also report on Wednesday before the market opens, and analyst consensus is for EPS to rise to $1.67 from $1.43 a year ago. Revenue is forecast to increase 6.4% to $21.5 billion. Traders will likely be looking at the company's performance for signs of consumer behaviour and commentary on the outlook for the mortgage industry.

Citigroup's earnings will be released ahead of the market open on Wednesday, with consensus expectations for earnings jumping to $1.62 from $1.35 previously. Revenue is projected to rise 4.4% to $20.5 billion. The company is expected to benefit from larger trading gains in its capital markets segment, driven by higher market volatility and increased M&A activity during the period.