5 Things to Expect From Bank Earnings in the First Quarter

5 things to expect from bank earnings in the first quarter

Sumary of 5 Things to Expect From Bank Earnings in the First Quarter:

  • Next week, several big banks will kick off earnings season by releasing reports and they should give investors a first peek under the hood of 2021, which could be a very interesting year for the sector given all of the different factors at play..
  • Analysts, on average, expect Bank of America (NYSE:BAC) and Wells Fargo (NYSE:WFC) to just slightly beat out their fourth-quarter earnings, while Citigroup (NYSE:C) is expected to beat its fourth-quarter earnings handily..
  • Analysts expect JPMorgan Chase (NYSE:JPM) to come up well short of its monster fourth-quarter earnings performance, but the bank released nearly $3 billion in reserves last quarter and had another banner quarter in its corporate and investment banking division..
  • Nearly all banks last year reserved significantly in order to brace for heavy loan losses brought on by the pandemic..
  • With the credit picture much clearer and most economists projecting higher GDP, I expect a number of banks to release reserves back onto the income statement, which will juice earnings..
  • Large corporations resorted to the capital markets, while loan revolver utilization among middle-market businesses dropped as well..
  • While the news may be disappointing, banks should still make more net interest income on many of their loans and securities as a result of longer-term rates increasing significantly in 2021..
  • When the Federal Reserve abruptly dropped its federal funds rate to practically zero at the beginning of the pandemic, it triggered a wave of refinancing activity that continued to hold up through 2020..
  • The yield on the 10-year Treasury note, which mortgage rates move in line with, has risen sharply in 2021 on inflation fears and the potential of future rate hikes…

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