Profits at the biggest U.S. consumer lenders are likely to rise in the third quarter, in contrast with investment banks still facing a dealmaking slump, analysts said.
JPMorgan Chase (JPM.N), which kicks off earnings for big U.S. lenders Friday, will set the tone for large banks. It is predicted to post a roughly 25% jump in earnings per share (EPS) versus a year earlier, LSEG estimates showed.
Goldman Sachs (GS.N) and Citigroup (C.N) are expected to report the biggest EPS declines of 35% and 26% respectively, according to LSEG estimates. Morgan Stanley’s (MS.N) EPS is also forecast to drop.
“This quarter is all about higher interest rates for longer,” said Mike Mayo, an analyst at Wells Fargo. “They will affect banks’ funding, lending, ability of borrowers to repay loans, losses in securities and capital requirements.”
JPMorgan, the nation’s largest lender, is “best positioned” to handle higher rates and could surprise markets with stronger-than expected results, said Bank of America analyst Ebrahim Poonawala, who raised his earnings estimate.
U.S. employers added 336,000 positions in September in a return to the fevered hiring seen during the pandemic, potentially bolstering the case for another interest rate increase by the Federal Reserve. Another hike, and the persistence of elevated borrowing costs, could pour cold water on a nascent recovery in dealmaking.
Wall Street CEOs have cited the return of some initial public offerings, including for SoftBank’s Arm Holdings , as signs of a market revival after months in the doldrums. The outbreak of war in Israel could further dampen market sentiment.