Big bank profits will highlight the unofficial start of the third quarter earnings season this week, with investors looking for sequentially improving performance, as well as a guide on economic trends heading into the final months of the year. 

With the Federal Reserve keeping its cap on dividend and buybacks in place until at least 2021 in order to ensure that lenders have enough capital to absorb a protracted downturn triggered by the coronavirus pandemic, investors will be looking to see how each of the largest U.S. banks will manage both their credit provisions and near-term economic forecasts as they publish third quarter earnings throughout the week.

Under the Fed’s restrictions, banks will be limited to paying dividends that are either in line with payouts from last year or equal to an average of earnings for the previous four quarters. 

The six biggest U.S. banks — JPMorgan Chase, Citigroup, Bank of America, Goldman Sachs Morgan Stanley and Wells Fargo — have booked around $60 billion in loan loss provisions so far this year, including $34.6 billion over the three months ending in June, as they took advantage of accounting changes that allowed them to front-load the economic costs of the pandemic.

Below is a brief snap shot of analysts’ expectations for Big Six earnings this week, starting with JPMorgan’s third quarter update, which is slated for around 6:45 am Eastern time on Tuesday.

JPMorgan Chase & Co.  (JPM) – Get Report: The country’s biggest bank is expected to report a 17.2% decline in core earnings, to $2.22 per share, on revenues of around $20.13 billion. 

JPMorgan isn’t expected to add to its loan loss provisions in the third quarter, following a front-loaded $10.5 billion increase in the three months ending in June, and investors are likely instead

It didn’t really help that the last few weeks my bedtime reading at night was the “Billion Dollar Whale”, the story of the now-infamous Malaysian Jho Low and the pilfering of the 1MDB Malaysian sovereign debt fund, where Low basically spent $12 billion of the fund’s proceeds on everything from excessive partying, to artwork, to real estate, to yachts, to you name it, some of the debt issuance aided by the most respected of all former white-shoe firms, Goldman Sachs (GS).

Gary Cohn and Lloyd Blankfein aren’t exactly portrayed in a favorable light at the end of the book, particularly after the posturing post-2008, but all that being said, the issue is behind Goldman and it’s not worthy of further discussion.

Goldman reports its Q3 ’20 financial results on Wednesday, October 14th, before the opening bell, with current Street consensus per IBES by Refinitiv, expecting $5.22 in EPS on $9.25 billion in revenue for expected y/y growth of 9% and 11% respectively.

It was a monster second quarter that Goldman reported in mid-July ’20, when the investment banking giant printed $6.26 in earnings per share versus a $3.13 estimate on revenue of $13.3 billion versus the IBES/Refinitiv estimate of $9.76 billion for upside surprises of 100% and 36% respectively.

Goldman’s net revenue grew 41% y/y in Q2 ’20, generating 8% EPS growth, also y/y.

Q2 ’20 results were emblematic of the late 1990s’/early 2000s’ monster quarters the investment banks printed in robust markets.

Fixed-income revenue was 120% higher y/y while equity revenue was 60% higher, with fixed income primarily driven by the explosion in corporate bond issuance after Jay Powell lit the lamp in late March/early April ’20 announcing the various Fed liquidity programs.

Buyback Impact

GS Share Buyback Impact

Source: Internal valuation s/sheet from earnings releases, 10-Qs

When looking at current forward estimates

From 1990 until 2010, the Supreme Court decided no cases about personal jurisdiction, the legal doctrine controlling when a defendant can be made to litigate within a state. For perspective, Justice David Souter joined the court in fall 1990 and retired in summer 2009 without hearing one personal-jurisdiction case. Since 2010, however, personal jurisdiction has become a hot issue on the court’s docket. The latest case, Ford Motor Co. v. Montana Eighth Judicial District (consolidated with Ford Motor Co. v. Bandemer), considers whether state courts in Montana and Minnesota have personal jurisdiction over two lawsuits against Ford, which sells cars in both states but manufactured and sold the specific cars at issue out-of-state. The court rescheduled this case from last term and will hold telephonic argument on Wednesday.

Background

Ford Motor Co. is headquartered in Michigan and incorporated in Delaware. It designs and manufactures automobiles, which it sells to independently owned-and-operated dealers throughout the country.

Montana Eighth Judicial District arose from a 2015 accident in Montana involving a 1996 Ford Explorer that killed driver Markkaya Jean Gullet. Her estate sued Ford in state court in Montana, alleging design defect, failure to warn and negligence. Gullett’s car was assembled in Kentucky, sold to a dealership in Washington and originally sold to a consumer in Oregon. It went through numerous sales before reaching Gullett in Montana.

Bandemer arose from a 2015 accident in Minnesota involving a 1994 Ford Crown Victoria that injured passenger Adam Bandemer. Bandemer sued Ford in state court in Minnesota, asserting claims for products liability, negligence and breach of warranty. The car involved in the accident was designed in Michigan, assembled in Ontario, Canada, and sold to a dealership in North Dakota. The vehicle was with its fifth owner when registered in Minnesota in 2013.

Personal jurisdiction

The