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Wall Street’s biggest banks are no strangers to raking in the dough, but the combination of falling rates, a loosening regulatory outlook, and deal-making optimism makes this earnings season particularly rosy.
JPMorgan, Goldman Sachs, Wells Fargo, and Citi kick things off with quarterly reports Wednesday, with Bank of America and Morgan Stanley close behind on Thursday.
Each of those stocks are coming off a banner stretch that’s steadily improved with Donald Trump’s election and rising hopes of an economic soft landing.
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A Trump-fueled boom in deal-making and trading to close out 2024 should yield hefty windfalls for Wall Street’s biggest names. The six largest firms by assets—JPMorgan, Goldman Sachs, Morgan Stanley, Bank of America, Citi, Wells Fargo—are together expected to report $31 billion in profits for the final three months of 2024, Bloomberg data shows.
Investment banking fees, meanwhile, are forecast to have grown in the high double-digits across the board. Analysts expect JPMorgan, for instance, to report 45% higher fees in the fourth quarter compared to the same period in 2023.
The result is big bucks for Big Banks & Co.: Among the S&P 500’s eleven sectors, financials are expected to report the highest year over year earnings growth at nearly 40%, according to FactSet.
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Valuations for these stocks, however, now hover at their highest level in years.
KBW, an index that tracks a basket of bank stocks, has climbed more than 38% over the last 12 months—well above the S&P 500’s roughly 23% return during that same time. According to Bank of America, investors are pouring their money into this hot sector: BofA analysts report that financial stocks in recent weeks have seen their biggest inflows since March 2023.
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All of the above has left some investors concerned that expectations have ballooned too high.
Cetera Investment Management CIO Gene Goldman, for one, says that weak loan growth, pressure on net interest income, and the impact of high interest rates on deposit costs and loan demand remain top of mind.
“Beyond this earnings season, despite a potentially more business-friendly environment under the Trump administration, banks and the financial services sector as a whole are likely to face pressure as the sector faces tough year over year earnings comparisons,” Goldman said, noting that choppy trading could follow in the coming weeks.
Must be nice: One group that will certainly be pleased with strong bank earnings is investment bankers. After two years of lower bonuses amid a slowdown in dealmaking, traders at Bank of America, Morgan Stanley and JP Morgan are expected to enjoy bonuses of 10% or higher this year, with the average bonus bump at Goldman Sachs closer to 15%.
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