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Bank earnings start this week: What Wall Street is watching

The banking sector is set to take center stage as the second quarter earnings season kicks off this Friday. Banking giants JPMorgan Chase (JPM), Wells Fargo (WFC), and Citigroup (C) are slated to release their earnings results, with investors closely watching to gauge the financial health of the US economy.

Yahoo Finance reporter David Hollerith takes a closer look at what investors and analysts will be watching.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.

This post was written by Angel Smith

Video transcript

Big banks kicking off a new earnings season on Friday including JP Morgan, Wells Fargo and Citigroup for more on what we can expect we're bringing in Yahoo finds his very own.

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David Holi.

David.

Hey Josh, uh ahead of second quarter earnings uh blowout.

Uh operating results aren't expected for the country's uh biggest uh four banks.

JP Morgan Bank of America, Citigroup and Wells Fargo.

Analysts have described earnings for this quarter um generally from what executives have guided towards as both conservative and subdued.

Now, the context is that for most of last year, the big four lenders, particularly JP Morgan and Wells Fargo have benefited a lot from higher interest rates compared to smaller rivals.

And since the beginning of the year, all these bank stocks have been on an incredible rally.

They're up at least 20% outperforming the, the rest of the industry as well as the S and P. Now, JP Morgan Wells Fargo Citigroup report on Friday, as you pointed out.

And Bank of America report report on Tuesday, um they're all expected to show a high uh gains in their investment banking revenue compared to last year net income though is expected to be down on a year over year basis for all these institutions that's based on analysts expectations.

And it has a lot to do with the main street operations of just taking in deposits to make loans.

Those are getting pressured by higher interest rates in terms of credit and deposit costs.

These banks are are paying so on the investment banking front.

As I mentioned, all these banks are going to benefit, but it also makes for a different story for JP Morgan.

Uh excuse me, Morgan Stanley and Goldman Sachs, which are both more investment banking focused.

Uh They're likely to have a much better quarter in terms of their bottom line profits.

Um but broadly, analysts are going to be concerned about um about what these banks are going to say in terms of guidance um based on how things are going with higher interest rates, uh especially credit, credit quality for these banks.

Um but also how they might fare if interest rates are lowered later this year.

Um This all has to do with their net interest income guidance, which again is their biggest profit um source and we'll want to see if those banks can keep to it.

Uh As an example, JP Morgan has sort of said lately that it hasn't, has been out earning on its net interest Income Bank of America.

On the other hand, has pointed to the second quarter as its bottom with a pick up in the second half of the year.

And David, I'm just curious as well, what we're hearing around sort of the capital markets, businesses for a lot of these banks.

Right.

And, and how maybe those fared in, in the second quarter.

Yeah.

So Julie, um, compared to a year ago, uh they look much better.

Um, Goldman Sachs in particular, they're coming off of a particularly rough uh quarter from last year, but compared to last quarter, um the beginning of the year, investment banking is not quite as strong, but again, I this is all to say, it looks much better than anything that was seen last year.

Um And that has a lot to do with the rebound in the capital markets.

So that's continued to, to look pretty good.

And obviously there's going to be a lot of uh, analysts asking about whether or not anything is changing, uh given the current path of the fed.

All right.

Well, we'll see what all the numbers show when we start to get them on Friday.

David.

Thank you so much.