Four of Wall Street's biggest lenders post quarterly numbers before Tuesday's open, with the KBW bank index well off its peak. Long Treasury yields above 5% cut both ways for lenders, and executives' comments on AI lending may matter as much as the numbers.
Four banks are expected to report about $114 billion of combined revenue on Tuesday morning. The market has spent two months pricing them as if that number matters less than what comes next.
The KBW Nasdaq Bank Index sits more than 14% below its August peak. The decline has come as long-term rates stayed high, inflation stayed sticky and financing for AI infrastructure increasingly ran through bank balance sheets.
Wells Fargo is due to report around 7 a.m. Eastern, Goldman Sachs around 7:30 a.m. and Citigroup around 8 a.m. JPMorgan Chase plans to release results at about 7 a.m., with its conference call at 8:30 a.m.
The Estimates
According to estimates compiled by Financial Modeling Prep, JPMorgan is the heavyweight of the group, at about $51.2 billion of forecast revenue, roughly 45% of the four-bank total, and $5.93 of expected earnings per share. Citigroup's forecast is $23.7 billion and $2.65 a share. For Wells Fargo the figures are $22.3 billion and $1.85, and for Goldman Sachs $16.8 billion and $12.86. Per-share forecasts for Goldman vary unusually widely across analysts, from below $13 to more than $16.
The bar for the broader season is high. FactSet's tally of analyst forecasts points to S&P 500 earnings close to 30% above last year's third quarter.
Where The Shares Stand
The stocks were mixed on Monday. Citigroup rose about 1.8% to $131.93 and JPMorgan about 0.4% to $334.30. Goldman slipped about 0.2% to $893.95 and Wells Fargo about 0.3% to $83.30.
Rates Cut Both Ways
The 10-year Treasury yield traded near 5.20% early Tuesday after touching about 5.36% last week. Higher long-term rates can lift what banks earn on new loans and securities. They can also raise deposit costs, reduce the value of bonds banks already hold and slow borrowing for homes and businesses.
Anthony Saglimbene, chief market strategist at Ameriprise, said banks are one of three groups likely to shape the season, alongside big technology companies and energy producers. "Underneath these areas, the health of consumers and businesses amid higher interest rates, elevated costs, and concerns about the macroeconomic environment will be closely monitored across sectors throughout the season," he wrote.
The AI Question
This week's results also land in the middle of a debate over financing for artificial intelligence. Broadcom's chief executive said Monday that capital may be the biggest constraint on AI growth. Several large banks have been working to reduce their exposure to data-center loans, and executives' comments on that lending and on dealmaking for AI companies may move the stocks as much as the quarterly numbers.
Market Implications
One reading is that the drawdown has priced in enough bad news. If results show stable credit, solid trading and a revival in dealmaking, shares that have fallen 14% have room to recover.
A second reading is that the stocks are reflecting risks that will show up later. Higher long-term yields, a consumer squeezed by energy costs and growing exposure to AI infrastructure loans may not be visible in third-quarter numbers but could surface in guidance.
What To Watch
Net interest income guidance, credit-loss provisions and commentary on deposit costs from Tuesday's four banks are the first tests. Bank of America and Morgan Stanley report Wednesday, alongside the September consumer-price report.