Big banks = big profits?

Wall Street is taking a good, hard look in the mirror this week.

The third-quarter earnings season begins tomorrow with big banks dropping their latest numbers, and analysts on the Street are questioning how well their own peers will perform after spending the last quarter judging everyone else.

The third quarter was tumultuous for legacy finance veterans, to say the least. The Fed gave interest rates a surprise 50 basis point haircut, the stock market spent months riding a roller coaster, and geopolitical conflict sharply escalated. How some of the biggest companies in the financial world handled all those ups and downs will indicate what investors can expect from the rest of the market this earnings season.

Heavyweights Wells Fargo, BlackRock, and JPMorgan kick off the earnings season, reporting their quarterly earnings first thing tomorrow morning, while Bank of America, Citi, and Goldman Sachs will have their turn next week.

• JPMorgan is expected to report earnings per share (EPS) of $4.01 for Q3, while revenue should reach $41.02 billion. That would mean a 7% decline in EPS from the third quarter of last year, and a nearly 3% increase in revenue.
• BlackRock’s EPS is forecast to come in at $10.26, a 6% year-over year decline. Revenue should reach $5.04 billion, an 11.6% jump from last year.
• Wells Fargo is projected to report EPS of $1.27, a decline of nearly 9% from the year prior. Revenue, too, is expected to decline 2.3% from the year prior, reaching $20.38 billion for the third quarter—the worst projected performance of the three banks.

As you can see above, finance bros fueled by Sweetgreen and fear haven’t been raking in the dough as much as they had in previous years. In the third quarter, the sector suffered from slowing profits, while higher deposit costs have driven net interest income lower.

But, while the Fed’s rate cut was too late to help boost bottom lines last quarter, it should give banks a more optimistic outlook going forward. Lower rates mean lower deposit costs, which will provide banks with a boost.

So, it looks like all those investment bankers might not be spending much downtime at home over the holidays after all (surprise, surprise). Instead, they’ll be busy making sure this coming quarter is better than the last.—LB