Major Wall Street Banks to Release Earnings This Week

Q1 2022 earnings season is set to open this week as major American financial institutions release their results for the first three months of the year. Analyst expectations are that major banks like JPMorgan, Wells Fargo, and Goldman Sachs will unveil lacklustre numbers compared to those from a year ago.

Big Bank Market Trends

It’s no secret that the global economy has experienced significant volatility since the beginning of the year against the backdrop of the conflict in Ukraine, skyrocketing inflation across industrialised economies, and the continuing COVID-19 pandemic. The U.S. financial sector has not been spared the effects of these wider trends.

However, according to experts on the sector, much of the reason behind the fact that these firms ended up so far in the black in last year’s Q1 was due to a factor that wasn’t repeated in 2022. Last year, major banks released large credit loss allowances, funds they had accumulated in order to absorb the potential shock of debts going unpaid in the first year of the pandemic. These monies went a long way toward boosting the revenues of banks last year, but were absent from these institutions’ balance sheets in 2022.

A further factor that pushed bank revenues up last year was the jump in trading and financial deals that contributed to raising bottom lines on Wall Street. However, some market watchers estimate that last year’s bumper crop on the capital markets will not be shown to have been repeated; some even foresee a drop of nearly one-fifth in trading and 36% in investment banking. While the course of interest rate hikes the Federal Reserve has recently embarked on may yet prove beneficial for bank profits, it is not yet known to what extent this shift in monetary policy will be reflected in this weeks’ earnings releases.                                                                                                                 

Earnings This Week

The military conflict in Ukraine and the progressive unplugging of the Russian Federation from the world financial system have had an outsized effect on America’s largest banks. With these financial institutions set to open this quarter’s earnings season, traders may be able to get a better sense of exactly how the crisis in Eastern Europe has impacted business strategies on Wall Street this week.

On Wednesday before the opening bell, JPMorgan (JPM) is set to release its results for the first quarter of 2022. This venerable firm was heavily exposed to the Russian financial sector; CEO Jamie Dimon recently stated that the bank could stand to lose up to $1 billion in the wake of U.S. sanctions. JPMorgan’s stock value has been on a steep downtrend over the past year, and analyst consensus is that managed revenue will have declined by 6.1% to $31.1 billion, with an accompanying decline of nearly 40% in earnings per share (EPS) to $2.73.

Wells Fargo, expected to release Q1 numbers before market open on Thursday, stands out somewhat from its peers in that its stock has declined by less than 4% so far this year, compared to the 20% drop observed on the Dow Jones U.S. Banks Index. This bank’s Q4 2021 results were generally positive, showing the benefits of a nearly $900 million ‘safeguard funds’ release. Additionally, WellsFargo (WFC) bought back $7 billion worth of its own stock from shareholders over the last three months of last year. Market expectations are that the firm will report an EPS figure of 80 cents, and revenues of $17.79 billion on Thursday.

Goldman Sachs (GS), also set to make its Q1 earnings public on Thursday morning, has been no stranger to the wider share value declines observed across the financial sector, losing 18% in share value since New Year’s. However, while the bank’s commercial loan business is well-established, executives are charting a course of expansion in the consumer loan and retail banking sectors as well. Goldman Sachs is expected to post EPS of $9.06 and revenues of $12.07 billion on Thursday; whether these numbers will encourage traders to buy the dip is yet to be seen.

While the financial shockwaves emanating from Moscow have yet to recede, swift interest rate hikes instituted by the Federal Open Market Committee could go some way toward raising bottom lines on Wall Street. This week’s opening of earnings season may show whether the U.S. financial sector can shake off the doldrums of recent months, or whether their stocks will continue to fall.