Big Banks Kick Off Q3 Earnings Season—What You Need to Know

As the third quarter of 2024 draws to a close, the earnings season for big banks is set to commence, offering investors valuable insights into the financial health of these institutions. This article provides an overview of the key factors shaping the earnings landscape for these banks and what investors should be aware of as they report their quarterly results.

The earnings revisions trend for big banks in Q3 has shifted negatively, with estimates coming down since the start of the period. This change reverses the favorable development seen in recent quarters and reflects the challenging macroeconomic environment. Total S&P 500 earnings are currently expected to be up +3.5% from the same period last year on +4.6% higher revenues. However, the current +3.5% growth pace is down from +6.9% at the start of July.

The earnings outlook varies across sectors within the big banks. Q3 earnings are expected to be above the year-earlier level for 9 of the 16 Zacks sectors, with Aerospace (up +30.5%) and Tech (+11.4%) as the only sectors with double-digit year-over-year gains. Quarterly earnings are expected to be below the year-earlier level for 7 sectors, with Energy (down -19.2%) and Conglomerates (-15.5%) as the biggest year-over-year decliners.

The easing of monetary policy by the Fed is expected to impact the earnings of big banks in the coming quarters. While the pressure on net interest incomes is a concern, the banking industry is economically sensitive and benefits from a declining interest rate environment through improved loan demand, favorable deposit and credit quality trends, and more investment banking activities.

JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC), and Wells Fargo & Co. (WFC) are among the big banks set to report their Q3 earnings. JPMorgan is expected to report earnings of $4.04 per share on $41.25 billion in revenues, representing year-over-year changes of -6.7% and +3.4%, respectively. Bank of America and Wells Fargo are also expected to have Q3 earnings declines, with the Zacks Major Banks industry as a whole expected to report a -17% decline in earnings on +0.7% higher revenues.

In conclusion, the Q3 earnings season for big banks is set to provide valuable insights into the financial health of these institutions. Investors should be aware of the negative shift in earnings revisions, the varying earnings outlook across sectors, and the impact of the Fed's monetary policy on bank earnings. As the earnings reports roll in, investors will have a clearer picture of the banks' performance and the broader economic landscape.