The largest U.S. banks prepare to report fourth-quarter earnings starting next week, delivering the first major test of financial sector health after a year marked by interest rate volatility and deposit pressure.
JPMorgan Chase, Wells Fargo, and Citigroup lead the earnings calendar. JPMorgan Chase reports Tuesday, followed by Wells Fargo on Wednesday and Citigroup on Thursday. Bank of America and Goldman Sachs follow later in the week. These reports will reveal how lenders navigated 2024's economic crosscurrents, including the Federal Reserve's 100-basis-point rate cuts that compressed lending margins and pressured net interest income.
Investors will focus on net interest margins, loan loss provisions, and guidance for 2025. The banking sector has traded at depressed valuations relative to historical norms, with concerns lingering over deposit competition, credit quality deterioration, and slowing loan growth. Fourth-quarter results will clarify whether deposit flight has stabilized and whether credit trends show meaningful stress.
The earnings releases arrive as the 10-year Treasury yield hovers near 4.2 percent after recent volatility. A steeper yield curve would benefit banks by widening lending spreads, while a flat curve signals margin pressure ahead. Analysts expect most large banks to report stable to declining net interest income compared to the year-ago quarter, with profitability supported by lower credit costs and controlled operating expenses.
Capital return programs also matter. Several banks suspended or reduced share buybacks during 2023's turmoil. Executives will signal whether confidence has returned through expanded buyback plans and dividend increases. Regulatory capital ratios will receive scrutiny given new Basel III endgame proposals that could force lenders to hold additional reserves against certain asset classes.
Q4 investment banking fees likely declined as deal activity softened in the final months of 2024. Trading revenue could surprise to the upside if equity volatility and treasury market dislocations created opportunities for fixed-income and equities desks. However, weakness in corporate advisory fees and underwhelming M&A activity suggest headwinds for investment banking divisions overall.
Market watchers will also monitor executive commentary on credit card delinquencies, commercial real estate exposure, and the consumer health outlook. Banks hold significant CRE exposure on their balance sheets, and stress in that market could force provision increases.
The financial sector's performance next week will set the tone for equity market sentiment entering 2025 and shape expectations for banking stock valuations.