US bank quarterly profits expected to fall again

Publish January 13, 2021

NEW YORK: When the biggest US banks begin reporting fourth-quarter results some of the headlines could show profits plunged by as much as 40 per cent from a year earlier, before the pandemic struck.
But investors will be focused on digging out clues to the earnings rebound expected in 2021.
“You can look at Q4 as somewhat of a transition quarter as you put some of the challenges from 2020 in the rear-view mirror and look ahead to an improved 2021,” said Barclays analyst Jason Goldberg.
The pandemic caused interest rates to plunge and produced a record decline in the margin between what lenders charge for loans and what they pay for money, said Goldberg.
The pandemic also pushed big US banks to set aside more than $65 billion for expected loan losses.
From those low points, banks could see profits more than double in the first and second quarters of 2021, according to Refinitiv’s IBES estimates.
Analysts have been ratcheting up 2021 estimates, but as of Friday, they showed Citigroup Inc reporting a 42 per cent fourth-quarter profit decline and Wells Fargo & Co posting a 39 per cent drop. Estimates for JPMorgan Chase & Co suggest a more moderate 5 per cent fall.
The following week, Bank of America Corp is expected to report a 33 per cent quarterly profit decline.
Morgan Stanley is expected to be up 1 per cent and Goldman Sachs Group Inc is expected to show a 43 per cent increase on the strength of share of the booming capital markets businesses.


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