What’s coming: Major US banks are preparing to release their Q4 2022 earnings later this week and early next week. With the dour economic outlook persisting, we don’t expect much to change from Q3. Here’s a look at the themes we’ll see in the forthcoming results.
Theme 1: Profit declines will prevail.
Most banks faced a double-digit profit decline in Q3, and Q4 isn’t likely to be different. Banking heads are talking more loudly about a coming recession, and they’re preparing to combat failing loans as consumers struggle to keep their heads above water.
Big US banks' profits expected to plunge in Q4. Source: Infinitive and Reuters.
Theme 2: Inflation still lurks and interest rates are still rising.
The Fed remains keen on hiking up interest rates to keep inflation in check, though it’s widely speculated that the magnitude of the hikes will slow. Still, the higher interest rates are bolstering banks’ net interest income.
Theme 3: Investment banking is still the pits.
The investment banking units at US banks are expected to underperform again as deal-making and debt and equity underwriting remained weak in Q4.
Theme 4: Consumer banking units see savings disappear and credit card balances rise.
Consumer banking units’ Q4 results will draw much of the attention, as a strong job report and stock market rally in the first week of January suggested that consumers are still financially well-off. But larger trends hint that consumers may find their backs against the wall as 2023 advances.
Banking heads are beginning to take threats of a coming recession more seriously, and their commentary around Q4 earnings releases will likely describe the steps they’re taking to weather the storm, including references to recent and upcoming job cuts.
Dates to watch:
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