Earnings season starts with big banks: What to know in the week ahead

The third quarter earnings season kicks off this week with a plethora of big banks reporting results.
While analysts recently improved their expectations for S&P 500 companies' results, most companies are likely to still see year-over-year earnings declines, with the effects of the coronavirus pandemic continuing.
Expectations for the Q3 winning season
Scroll to continue with the content
display
Wild bull
How he traded $ 2.8 million in stocks part-time at home
Kyle Dennis took a leap of faith and decided to invest his $ 15,000 savings in the stock market - $ 2.8 million later, he owes his success to these strategies
LEARN MORE
Second quarter corporate earnings overwhelmingly exceeded expectations, and Wall Street had prepared for companies to bottom out during its worst virus-related deals in late spring and early summer.
A record 84% of the S&P 500 companies reported positive surprises in earnings per share (EPS) in the second quarter, although EPS declined more than 30% overall, according to FactSet.
These better-than-feared second quarter results have also meant that analysts have rarely revised their estimates for the third quarter results upwards - which in turn means that companies can disappoint against the increased expectations.
"The bottom-up EPS estimate for the third quarter (a summary of the median EPS estimates for the third quarter for all companies in the index that can be used as a proxy for the index's earnings) increased 4.1% ( from $ 31.78 to $ 33.10)) June 30th to September 30th, "FactSet's John Butters said in a note on Friday. Six sectors saw estimates spike, including the consumer discretionary, energy, finance and materials sectors.
Over the past five years, bottom-up EPS estimates have been revised down by an average of 5.0%, Butters added. This was the first time since Q2 2018 that analysts have raised their EPS estimates for S&P 500 companies in a quarter. Prior to 2018, the S&P 500 EPS estimates have not increased since 2010.
Despite the upward revisions, analysts continue to expect, according to FactSet, that the S&P 500 EPS will drop by a total of 20.5% year-on-year in the third quarter. If this were to happen, it would be the index's second largest year-over-year decline in earnings since the second quarter of 2009.
Banks first
Big banks will be the first large cohort to report. Names like JPMorgan Chase (JPM), Goldman Sachs (GS), and Wells Fargo (WFC) will all publish results.
Financials were among the worst performing sectors this year. The sector fell about 18% year-to-date through Friday, up from a 7.6% gain in the S&P 500.
The industry has faced myriad stresses throughout the pandemic. Interest rates stayed close to zero and weighed on the banks' net interest income. The Federal Reserve has telegraphed that policy rates are expected to stay at zero through at least 2023, which will serve as an ongoing anchor for banks' profitability.
The Federal Reserve recently extended its ban on share buybacks in the largest US banks until at least the end of the year "to ensure that large banks maintain high levels of capital resilience," the central bank noted in late September. As part of the decision, the Fed also kept a cap on dividend payments until the fourth quarter of the year, with companies only allowed to pay out the same amount as in the previous quarter or the quarterly average of past earnings four quarters, whichever of those Options is less.
In the first half of the year, major banks allocated billions to prepare for the potential for customers to default on payments due to the coronavirus pandemic economic crisis. According to S & P Global Ratings, these provisions at well-known US banks amounted to USD 115 billion in the first half of the year. These expanded reserves diminished the operating results of these banks and, in a broader sense, served as indicators that these institutions expected that customers would suffer a major financial blow due to the Covid-19 crisis. For JPMorgan Chase, Citigroup and Wells Fargo alone, loan loss provisions in the second quarter totaled $ 28 billion, according to an analysis by the Wall Street Journal.
"While the pace of provisioning may be slowing, we believe that US banks as a whole are far from finished with provisions for pandemic losses," said analysts at S&P Global Ratings, Brendan Browne and Stuart Plesser, in the third Quarter.
"Banks' write-down levels at the end of the second quarter could indicate that they are more optimistic than we are on their loss expectations and performance will be very sensitive to how those expectations play out," they added. "Performance will also vary significantly from bank to bank, depending not only on the quality of their underwriting losses and credit losses, but also on having sufficient allowance for the second quarter and on their ability to offset losses with net proceeds before provision (PPNR)) . ”
A ray of hope could fall on the market receipts of larger banks as the record surge in equity markets from late March to late summer contributed to a surge in trading activity. Trading sales at JPMorgan Chase rose 79% and Goldman Sachs rose 93% in the second quarter, with both stock and bond trading booming. Big store investment banking results could also hold strong after underwriting for IPOs and Special Purpose Acquisition Company (SPAC) spiked during the summer.
Meanwhile, the downsizing that hit those in service sectors like restaurants and hospitality hardest at the start of the pandemic has spread to workers on Wall Street. Bloomberg reported in late September that Goldman Sachs is pushing a plan to cut about 1% of its workforce for a total of about 400 jobs. And Wells Fargo reportedly cut more than 700 jobs in its commercial banking division recently, with more possible.
People walk past JP Morgan Chase & Co.'s corporate headquarters in Manhattan. REUTERS / Mike Segar
Economic calendar
Monday: N / A
Tuesday: NFIB Small Business Optimism, September (101.2 expected, 100.2 before); Real average weekly earnings year-on-year (3.8% in August); YoY Real Average Hourly Wage, September (3.2% in August); Consumer Price Index MoM, September (0.2% expected, 0.4% in August); YoY Consumer Price Index, September (1.4% expected, 1.3% in August); Consumer Price Index excluding Food and Energy MoM, September (0.2% expected, 0.4% in August); Consumer price index excluding food and energy year-on-year, September (1.8% expected, 1.7% in August)
Wednesday: MBA mortgage applications, week through October 9 (4.6% in the previous week); Producer price index MoM, September (0.1% expected, 0.3% in August); YoY producer price index, September (0.2% expected, -0.6% in August); Producer price index excluding food and energy MoM, September (0.2% expected, 0.4% in August); Producer price index excluding food and energy year-on-year, September (0.9% expected, 0.6% in August)
Thursday: Initial jobless claims, week ending October 10 (840,000 in the previous week); Continued Claims, Week Ending October 3 (10.976 million the previous week); Empire State Manufacturing Index, October (12.0 expected, 17.0 in September); Import Price Index MoM, September (0.3% expected, 0.9% in August); Philadelphia Fed Business Outlook Index, October (14.5 expected, 15.0 in September)
Friday: Retail sales ahead of September (0.7% expected, 0.6% in August); Retail sales excluding cars and gas MoM, advance in September (0.4% expected, 0.7% in August); Industrial Production MoM, September (0.6% expected, 0.4% in August); Capacity Utilization, September (72.1% expected, 71.4% in August); University of Michigan Consumer Sentiment, tentative October (80.3 expected, 80.4 in September); Long-term net TIC flows. August ($ 10.8 billion in July); Total TIC net flows in August (-88.7 billion in July)
Results calendar
Monday: N / A
Tuesday: JPMorgan Chase (JPM), BlackRock (BLK), Johnson & Johnson (JNJ), Fastenal (FAST), Delta Airlines (DAL), Citigroup (C) before market opening
Wednesday: Bank of America (BAC), PNC Financial Services Group (PNC), The Progressive Corp. (PGR), UnitedHealth Group (UNH), US Bancorp (USB), Goldman Sachs (GS) and Wells Fargo (WFC) before market open; Alcoa (AA), United Airlines (UAL) after market close
Thursday: Charles Schwab (SCHW), Truist Financial Corp (TFC), Walgreens Boots Alliance (WBA) and Morgan Stanley (MS) ahead of market opening
Friday: Bank of New York Mellon (BK), VF Corp. (VFC), E-Trade Financial Corp. (ETFC), Schlumberger (SLB), Kansas City Southern (KSU), Honeywell (HON), Citizens Financial Group (CFG), Allied Finance (ALLY), State Street Corp (STT)
- -
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
Read more from Emily:
The e-commerce start-up Verishop wants to become the "largest online shopping center in the western world": CEO
Some wellness products grow "over 1,000%" during the pandemic: Ro CEO
What we can learn from the 17 stock market crashes since 1870
Find live stock quotes and the latest business and financial news here
For tutorials and information on investing and trading stocks, visit Cashay
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn and reddit.
In this article
JPM
+ 1.23%
JPM-PC
-0.21%
JPM-PD
+ 0.14%
JPM-PG
+ 0.08%
JPM-PH
0.00%
JPM-PJ
+ 0.41%
GSFPX
+ 1.29%
^ IXIC
+ 2.56%
GS
+ 3.17%
GS-PA
-0.21%
GS-PD
+ 0.25%
GS-PJ
-0.04%
GS-PK
+ 0.14%
GS-PN
+ 0.04%
WBA
+ 1.62%
MS
+ 3.91%
MS-PA
-0.04%
MS-PE
+ 0.46%
MS-PF
-0.39%
MS-PI
-0.11%
MS-PK
-0.32%
MS-PL
+ 0.90%
MSDY
0.00%
SCHW
+ 0.63%
SCHW-PC
-0.28%
SCHW-PD
+ 0.27%
USB
+ 1.48%
USB-PH
-0.60%
USB-PM
-0.19%
USB-PO
+ 0.19%
USB-PP
+ 0.47%
WFC
+ 1.50%
WFC-PL
+ 0.01%
WFC-PN
-0.23%
WFC-PO
-0.23%
WFC-PP
-0.20%
WFC-PQ
+ 0.34%
WFC-PR
+ 0.28%
WFC-PT
+ 0.08%
WFC-PV
0.00%
WFC-PW
+ 0.19%
WFC-PX
0.00%
WFC-PY
-0.11%
WFC-PZ
+ 0.16%
NOBH
-0.21%
PGR
+ 1.50%
BAC
+ 1.26%
BAC-PA
+ 0.08%
BAC-PB
-0.47%
BAC-PC
+ 0.20%
BAC-PE
-0.07%
BAC-PJC
0.00%
BAC-PK
-0.11%
BAC-PL
+ 0.07%
BAC-PM
+ 0.55%
BAC-PN
+ 0.68%
BML-PG
-0.42%
BML-PH
-0.89%
BML-PJ
-0.04%
BML-PL
-0.42%
AA
+ 0.56%
UAL
-1.99%
JNJ
+ 0.58%
FAST
+ 2.17%
DAL
-0.52%
C.
+ 2.11%
C-PIC
0.00%
C-PJ
-0.14%
C-PK
-0.21%
C-PS
-0.50%
TFC
+ 0.58%
TFC-PF
-0.16%
TFC-PG
-0.39%
TFC-PH
+ 0.19%
TFC-PI
+ 0.59%
TFC-PR
+ 0.94%
ETRA.SG
0.00%
HON
+ 0.56%
KSU
-1.66%
KSU-P
+ 5.19%
SPY
+ 1.59%
XLF
+ 1.11%
QQQ
+ 3.09%

You should check here to buy the best price guaranteed products.

Last News

Florida pastor facing sex crime charges in Tennessee found dead in parking garage

Your football forecast for the coming weekend

Fittest Man on Earth Justin Medeiros Gives a Tour of His Garage Gym

MacKenzie Weegar with a Goal vs. Buffalo Sabres

Plans underway for the space station of the future

Josh Norris with a Goal vs. Carolina Hurricanes