Weekly Report – January 10th, 2024

Graph 2024.01.10

Highlight of the Week

Banks Prepare to Release Q4 Earnings

  • The bank earnings season kicks off this Friday with Q4 reports from JP Morgan, Bank of America, CitiBank, and Wells Fargo. Regional banks will follow next week and into the rest of January. After a tumultuous year in 2023, the banking industry is projected to report a 21% decline in yearly earnings, according to a Factset study.
  • Notably, analysts expect to see reduced fee income due to muted capital markets activity, increased interest expense due to rising costs of deposits, and markdowns for unrealized losses on AFS securities.
  • Banks will likely recognize several one-time losses in Q4 earnings, further reducing profit.
    • According to a Bloomberg study, non-performing loans are expected to have risen to a combined $24.4 billion at the four largest US lenders in Q4, causing markdowns in certain portfolios.
    • Other one-time losses expected to hit Q4 earnings include restructuring fees and severance pay, FDIC assessment fees arising from last year’s bank failures, and realized losses from divesting in low-yield investments.
  • The 2024 guidance and commentary shared in bank earnings will provide insight into how banks are preparing for heightened regulation, new technologies, continued geopolitical tensions, and a slowing global economy. Further, investors will likely pay particular attention to the level and breadth of credit quality deterioration, as well as commentary on M&A activity and capital markets outlook.

Rate Curves

Graph 2024.01.10
Category: Market Updates
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