Four of the country's largest banks - JPMorgan Chase & Co, Bank of America Corp, Citigroup Inc, and Wells Fargo & Co - will report earnings on Friday. Analysts predict that they will report a combined $5.7 billion in reserves to prepare for soured loans, more than double the amount set aside a year earlier.
Increasing Interest Rates Could Worsen Economic Slowdown for Banks
The Federal Reserve's aggressive interest rate hikes have curbed spending among consumers and businesses, which has directly impacted bank profits. As economic middlemen, banks tend to see a decline in activity and profits when the economy slows. According to preliminary analysts' estimates, the six largest banks in the US are expected to report an average 17% drop in net profit in the fourth quarter from a year earlier.
Banks Turn to Job Cuts and Reserves as Economic Outlook Remains Uncertain
As the economic outlook remains uncertain, banks have begun to cut jobs and prepare for a potential recession. Goldman Sachs is planning to lay off thousands of employees starting Wednesday. Morgan Stanley and Citigroup have also made job cuts in recent weeks. Additionally, the six largest banks in the US are amassing a combined $5.7 billion in reserves to prepare for soured loans. Investors and analysts will pay close attention to bank bosses' commentary for insight into the economic outlook.