Most Wall Street banks are expected to report lower quarterly earnings and have a hard time for the rest of the year amidst the current banking crisis and the sluggish economy, Reuters reported on Monday.
Earnings per share of the top six U.S. banks are predicted to decline by 10 percent, access to cheap deposits likely boosted net interest income for the largest banks analysts stated, and banks will be reporting results on Friday.
JPMorgan Chase & Co is expected to be the highest bank with net interest margin – interest earned on loans versus interest paid to depositors, and is also expected to report a 30 percent increase in EP, with a 36 percent increase in net interest income.
With the tighter financial conditions and the slow economy, banks will be facing a slight loan growth and souring credit and forced to add to provisions to deal with the potential loss.
“We expect a challenging earnings season for the banks, and will be more defensive, implementing liquidity measures that could lead to downward revisions for net interest income,” said David Chiaverini, banking analyst at Wedbush Securities.
Capital markets activity will likely affect the profits, with analysts predicting a slowdown in trading revenue, these conditions is likely to have an impact on banks like Goldman Sachs and Morgan Stanley.
The net interest income for the six biggest bank in the US is predicted to increase by 30 percent, while gains from interest payments may be impacted by bad loans.
“There will still be incremental increases in provisions coming in this year, particularly for commercial real estate and potentially consumer credit cards,” said Ana Arsov, head of the North American banking team at rating agency Moody’s investors Service.
