Video source: YouTube, Reuters
By David Henry
NEW YORK (Reuters) – When the largest U.S. banks start reporting fourth-quarter results on Friday some headlines could spoil profits by as much as 40% from a year earlier, before hitting the pandemic.
But investors will be aiming to dig out notifications of the expected employment recovery in 2021.
“You can look at Q4 as something of a moving quarter as you put some of the challenges from 2020 in the rearview mirror and look forward to an improved 2021,” said Barclays analyst Jason Goldberg.
The pandemic caused interest rates to decline and led to a higher decline than the margin between what borrowers spend for loans and what they pay for money, Goldberg said.
The pandemic was also pushing major U.S. banks to set aside more than $ 65 billion for expected loan losses.
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From these low points, banks could see profits more than double in the first and second quarters of 2021, according to IBES Refinitiv estimates.
Bank stocks have risen 35% since early November. Since then, effective COVID-19 vaccines began to be rolled out, Democrats seized power in Washington, promising more economic stimulus, and the Federal Reserve said it would allow banks to repurchase stocks, increasing employment each allotment.
Analysts have been firming 2021 estimates, but as of Friday, they showed Citigroup Inc reporting a fourth-quarter profit decline of 42% and Wells Fargo & Co posting a 39% fall. Estimates for JPMorgan Chase & Co suggest a more moderate 5% drop.
All three of these banks will report on Friday.
Next week, Bank of America Corp. is expected to report a quarterly profit decline of 33%.
Morgan Stanley is expected to be up 1% and Goldman Sachs Group Inc is expected to show a 43% increase in the strength of the growing share of capital markets.
Reporting by David Henry in New York; Edited by Lauren Tara LaCapra and Nick Zieminski.
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Source: Reuters
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