Q2 2023 earnings season is set to continue in full force tomorrow with the publication of three important financial institutions’ results. Following months of volatility in the American economy, and the banking sector in particular, Wells Fargo and JPMorgan are expected to reveal to the public how they fared over the course of the second quarter tomorrow.
Wells Fargo to Get Fed Boost?
Tomorrow, July 14th, Wells Fargo (WFC) is set to release Q2 2023 results before the ring of the opening bell. According to some analysts, the venerable firm’s business fundamentals paint a rather positive picture heading into tomorrow’s earnings call.
In common with institutions across the banking industry, Wells Fargo’s bottom line may have been impacted by the near continual interest rate hikes instituted by the Federal Open Market Committee (FOMC) over the course of the past fourteen months. Last quarter, the firm even outpaced predictions on the back of higher than expected net interest income.
Wells Fargo is somewhat of an outlier among major U.S. banks in that its business portfolio is relatively heavily based on the commercial and retail banking sectors, as opposed to investment banking. This means that a greater percentage of its income flows from interest payments; in 2022, 61% of Wells Fargo’s total revenues were sourced in net interest income.
Accordingly, the series of interest rate hikes put in place by the Federal Reserve provides a boost to Wells Fargo’s bottom line. Net interest income for Q2 2023 is expected to come in at nearly $13 billion, a more than 26% year-over-year increase. The upward momentum provided by the Federal Reserve’s rate hikes may have been welcomed by Wells Fargo’s investors, as lending activity by the bank is expected to have declined over the course of the second quarter. Conversely, the rise in inflation likely brought costs for the firm upward over the course of the quarter, in part due to salary increases. (Source:Yahoo Finance)
Wells Fargo stock is up by nearly 4.8% so far this year, but it remains to be seen if a further boost will be in store following tomorrow’s earnings call. Quarterly revenues are expected to come in at more than $20 billion, a 19% year-over-year jump, with earnings per share (EPS) forecasted to have risen nearly 57% to $1.16.
JPMorgan Forges Ahead
Key American financial institution JPMorgan (JPM) is also expected to release Q2 2023 results tomorrow before market open. Tomorrow’s report could shed light on some weak aspects of the firm’s portfolio broadly shared across the banking industry.
Analysts predict that JPMorgan will show a decrease in market revenues for the second quarter, due to factors beyond the bank’s control. The Fed’s hawkish policies, which have periodically raised fears of a potential recession, may have dampened the market mood for equities, Commodities, and more. Accordingly, equity markets revenues are expected to have fallen by 1% over the course of Q2 2023 to $3.05 billion.
Furthermore, JPMorgan’s investment banking and mortgage loan branches are also expected to have been relatively weak between March and June. On the other hand, with the recent buyout of First Republic Bank as well as revenues boosted by high interest rates, the picture is far from all gloomy for JPMorgan. Estimates are for earnings per share to come in at $3.66, a year over year jump of 32% on the back of more than $37 billion in sales for the quarter. Whether these figures will help keep the bank’s share price, which has increased more than 10% so far this year, gathering momentum remains to be seen.
Recent months have seen a confluence of significant economic headwinds emanating from a range of factors at the macro level, but analysts seem to believe that major U.S. banks will be shown to have, by and large, weathered the storm over the course of the second quarter of 2023. Investors and traders alike will have to wait and see whether these predictions are borne out tomorrow before the beginning of the trading day.