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