US bank profits down in first quarter

NEW YORK, April 8 (Reuters) – Big U.S. banks are expected to post a sharp fall in first-quarter profits from a year ago as they benefited from exceptionally strong deals and transactions, and funds put aside for loan losses.

Net income for the six largest U.S. banks will decline about 35% from a year earlier, according to analysts’ estimates from Refinitiv I/B/E/S. Investment banking revenues stagnated after the Russian invasion of Ukraine in late February.

The quarter will be difficult for the biggest banks, according to analyst Christopher McGratty of Keefe, Bruyette & Woods. Estimated revenue declines of 36% in investment banking and 18% in trading are the biggest headwind, he said.

“Last year was huge for banking capital markets, so comparisons are tough,” McGratty said.

The quarter could be viewed as a short-term pain with the promise of long-term gain, Barclays analyst Jason Goldberg wrote in a report. One example came on March 31 when PNC Financial Services Group lowered its first-quarter revenue forecast but raised its full-year expectations, he noted.

Investors should focus more on the prospects for banks to increase net interest income, or the difference between loan income and interest paid on deposits and other funds, as they benefit from higher interest rates. students.

Bank executives will be asked for their views on whether the US economy will continue to grow if the war in Ukraine continues and the Federal Reserve continues to raise interest rates in an attempt to quell inflation. They may be in a rush to find out if low-income borrowers can make repayments after rising fuel and food prices.

JPMorgan Chase & Co (JPM.N)the largest bank in the United States, publishes its results on Wednesday.

Thursday, Citigroup Inc. (NC)Wells Fargo & Co (WFC.N)Goldman Sachs Group Inc. (GS.N) and Morgan Stanley (MS.N) report. Bank of America Corp (BAC.N) is due the following Monday.

Analysts expect pre-provision net income — which isn’t clouded by swings in set loss reserves during the pandemic — to decline more modestly than the overall fall in earnings.

Credit Suisse analyst Susan Roth Katzke expects a 7% fall in net income before provisioning, against a 24% fall in earnings per share at the banks she covers.

A growing concern for investors is whether banks, particularly JPMorgan, allow spending to rise too high. JPMorgan’s non-interest expenses jumped 11% last quarter, in part because of rising wages. He also warned of rising technologies and acquisition costs. Read more

Banks are more exposed to possible trade losses this quarter, especially in commodity markets which turned volatile after Russia launched what it calls a “special military operation” in Ukraine.

Some banks, such as Citigroup, may set aside provisions for Russian business losses after Western countries began imposing sanctions. Citigroup said it could lose nearly half of its $9.8 billion exposure in a severe scenario. Read more

Another unknown is the extent to which banks slowed their share buybacks during the quarter. Buybacks boosted earnings per share, but may have been tempered as banks saw their excess capital eroded by unrealized losses on bond holdings which fell in value as yields rose during the quarter. . L2N2W31XD

Reporting by David Henry in New York. Additional reporting by Sinéad Carew. Editing by Matt Scuffham

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