The first-quarter earnings season will begin later today with major U.S. banks, including JPMorgan Chase and Wells Fargo, followed by Bank of America, Citigroup and Morgan Stanley next week. After a turbulent week at Wall Street’, the results of these leading lenders will provide critical insights into the broader economic impact of President Trump’'s wide-ranging tariffs on business sentiment and outlook.
Analysts expect banks to deliver strong results in the first three months of the year, during which time the U.S. economy will still be resilient. However, with a more cautious tone expected due to rising economic uncertainties, attention is likely to shift towards forward direction. Growth outlooks, an important benchmark for investors, are expected to be revised downwards when assessing the long-term effects of the trade cut.
Prior to the recent tariff-driven market turmoil, the banking sector was among the stronger performers, backed by steady credit growth, improved liquidity conditions, and an increase in mergers and acquisitions (M&A) activities. As of February 19, shares of JPMorgan and Wells Fargo’ are approx. %It was valued at 13. However, in the midst of the escalating trade war ignited by Trump’'s tariff announcements, both stocks While depreciating more than ’, the sentiment was reversed.
Tariff-related uncertainties likely to put pressure on earnings
Following last week's mutual tariff announcement, Morgan Stanley analyst Betsy Grasek downgraded the U.S. banking sector's rating from ‘cazip’ to ‘compliant’. In a note to “, trade developments are moving our base scenario towards a serious gross domestic product slowdown, and with the risk that our bearish scenario will increase sharply, ” wrote. Grasek added that investment banking revenues may be more susceptible to recession risks than traditional lending.
Dilin Wu, a research strategist at ’, said economic uncertainty and rising recession risks from the tariff war could stifle credit demand. Wu said banks may need to face higher credit loss provisions that will further reduce “financial performance, adding that volatility in financial markets caused by uncertainties about ” tariffs will likely hamper capital market activities, negatively impacting investment banking revenues, especially mergers and acquisitions and equity issuances.
Investors' attention will likely focus on banks' perspectives and guidance on signs of the long-term impact of tariffs. Kyle Rodda, senior market analyst at Capital.com’, wrote in an email: “These hard facts mean that markets need to price the blow to corporate profits; The upcoming U.S. reporting period (launched unofficially by several U.S. banks on Friday) will be closely monitored in terms of declines in earnings and revision or complete removal of guidance.”
The Fed is wary of further interest rate cuts
The Federal Reserve ’'s interest rate path has become even more complicated as tariffs have increased expectations that inflationary pressures will renew. On Thursday, Boston Federal Reserve Bank President Susan Collins signaled that the central bank could delay further expansion: “Renewed price pressures may delay further normalization of policy, as confidence is needed that tariffs will not destabilize inflation expectations.”
While banks often benefit from high interest rates thanks to improved net interest margins, tighter policies can slow down credit growth, putting pressure on household spending and broader economic activity. As a result, estimates of banks' net interest income (NII) (the difference between what they earn from loans and what they pay on deposits) will likely be more prudent. Analysts at Bank of America’ expect a cautious stance from the management when the first quarter results are announced.
Bank earnings forecasts
Despite the negative winds caused by tariff uncertainty, bank earnings are expected to remain strong in the first quarter and all economic impacts of tariff increases are likely to occur later in the year.
According to consensus estimates compiled by Reuters, JPMorgan ’'s earnings per share (EPS) is 4.61 $ (€4.08) is expected to report; This is compared to the same period last year. %It represents an increase of 3.8’. Wells Fargo’'s EPS’ %It is expected to rise by 3.3 to $1.24 (€1.1). Bank of America’, compared to the previous year %With an increase of 8’, EPS’ is expected to report $0.82 (€0.73). Citigroup’'s earnings this quarter %It is expected to reach $1.86 (165 euros) with an increase of 18. by Morgan Stanley’nin EPS’de %It is expected to reach $2.22 (€1.97) with a 10 increase.
