Last updated on April 16, 2023
Over the next week some of the top banks and financial institutions such as J.P. Morgan (JPM), Wells Fargo (WFC), and BlackRock (BLK) (just to name a few), will be announcing their first quarter earnings. With the collapse of Silicon Valley and Signature Bank, there is no surprise that these reports will carry a significant amount of weight. While many are expecting earnings of larger institutions to be relatively unaffected, a bad report could make or break the confidence in the financial sector for the near future. Since the beginning of March, deposits in banks have had a sharp decline from about $17.7 to $17.2 billion. However, this decline is showing signs of slowing down. Along with this, as interest rates rise to about 5%, banks are inevitably going to be making more income on a loan-to-loan basis (assuming they are acquired at the same rate). All of this leads to a sort of ambiguity about the next week and what it may hold
Bank deposits from September 2022 to current
As of right now, investors are feeling confident. The financial sector has gained about 1% over the last week with some prominent banks such as Wells Fargo rising almost 7%. Other notable mentions including Charles Schwab (SCHW), Bank of America (BAC), and Citi (C), have all seen gains in the last week much above the sector average.
Whichever way earnings go, the banking and the financial industries as a whole are nowhere near “out of the wood”. As Jamie Dimon, CEO of J.P. Morgan & Chase stated, “…the current crisis is not yet over, and even when it is behind us, there will be repercussions from it for years to come.” These repercussions may hinder bank’s efforts for some time and with the Federal Reserve now predicting an imminent recession, the future still holds many uncertainties.
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