Four top U.S. banks report fourth-quarter earnings on Friday, and while all are expected to beat or match market forecasts, investors will be keenly watching their outlook statements for a glimpse of what's expected for the year ahead.
Deloitte, in its 2024 Banking And Capital Markets Outlook, has already noted that this will be a challenging year as financial services companies grapple with a slowing global economy, cuts in interest rates, continued geopolitical tensions and more assertive regulations.
But there are likely to be other disruptive forces at work. Not least the exponential pace at which new technologies are likely to be adopted, adding layers of risk and raising capital spending costs.
"The impact of generative artificial intelligence (GenAI), industry convergence, embedded finance, open data, digitization of money, decarbonization, digital identity and fraud will all grow in 2024," said Mike Wade, one of the authors of the Deloitte report.
Last year the SPDR S&P Bank ETF (NYSE: KBE), an exchange traded fund that tracks S&P 500-listed institutions, gained just 3.2% over the year, compared with the index-tracking SPDR S&P 500 ETF (NYSE: SPY), which gained 16%.
Four Banks To Report Q4 Earnings
Below are the four major banks reporting on Friday, Jan. 12:
JPMorgan Chase & Co (NYSE: JPM) shares gained 26.8% over 2023 - Zacks consensus estimate sees the company posting quarterly earnings of $3.64 per share, up 2% over the year, while revenues are expected to climb 13% to $39.03 billion.
Citigroup Inc (NYSE: C) shares were up 13.7% in 2023 - Zacks consensus earnings estimates of $1.04 per share represents a 5.5% decline on last year. Revenues are expected at $19.09 billion up 6% on the year ago figure.
Bank Of America Corp (NYSE: BAC) shares climbed 1.5% in 2023 - Zacks earnings consensus is 68 cents per share, down 20% from the previous year, while revenues are seen at $24 billion, down 2.3% from the same period in 2023.
Wells Fargo & Co (NYSE: WFC) shares were up 19% in 2023 - Zacks consensus is earnings per share of $1.15, up 71.6% from the same period a year ago, while revenues are seen at $20.3 billion, up 3.2% from the year ago period.
What Is The Outlook For 2024?
While we won't know each bank's individual outlook statement until Friday, here's what some other commentators on the industry have been saying in recent days and weeks.
Fitch Ratings - The rating agency said it was maintaining a deteriorating sector outlook for banks in 2024.
"Fitch expects pressure on the sector's core credit drivers of asset quality and operating profits, in particular, to be sustained in 2024. This reflects our expectations for weaker economic growth and labor market in 2024, higher interest rates for longer, and reduced credit supply and demand."
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S&P Global - The rating agency said its outlook for banks remained steady, based on solid capitalization, improved profitability and sound asset quality.
However, it added: "The weak economic outlook presents headwinds for banks' business volumes, asset quality, and financing conditions. The Russia-Ukraine and Israel-Hamas wars also bring spillover risks. Positively, most banks' earnings will continue to benefit from high interest rates."
Moody's - The rating agency said it held a negative view on banks as the operating environment was deteriorating as growth remains sluggish.
"Funding and liquidity will pose challenges, but capitalization will remain stable, benefiting from organic capital generation and moderate loan growth and as some of the largest US banks build up capital."