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US earnings preview: big banks kick-off Q3 reporting on Friday

While there are some reports during the week, traders will focus in on Friday when JP Morgan, Wells Fargo, Citigroup, and Morgan Stanley report. Watch out for bad debt provision as consumers and corporates find the going tough.

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Banks kick off Q3 earnings season

This coming Friday, four of the largest US banks report earnings and that kicks off the earnings season for this latest quarterly report. JPMorgan, Citigroup, Wells Fargo and Morgan Stanley all come out with numbers on Friday.

Markets have been somewhat turbulent, to say the least, in the last three months. While banks may have been able to charge more for customers to borrow because of interest rate hikes, demand for those very products are beginning to bottom out and indeed dry up to some degree. And we're talking here about personal debts, corporate debts, some of the mortgages as well, which are now more than 6%. That jump in borrowing costs has hit a lot of the demand within the sector, triggered by that higher inflation, the war in Ukraine and other supply chain issues.

Now, as a result, analysts expect that banks, when they start reporting the back end of this week, to increase by 5.4% year-on-year (YoY). So far as JPMorgan Chase is concerned, that's where we are looking for an increase in revenue to just over $32 billion. But analysts see a 22% drop in earnings per share to $2.91.

Three weeks ago, JP Morgan's chief financial officer warned the markets that investment banking revenue would be down by 45 to 50% in the third quarter (Q3).

Last year strong demand for IPOs and other deals pushed investment banking revenue up to $3.3 billion. But the amount of money being set aside to cover bad loans is likely to be one of the really big elements to watch out for so far as these banks are concerned.

Share price charts

I want to take a look at the JPMorgan share price chart. It trades all-sessions on the IG platform but you won't be able to trade it today because the US markets are out. But it will be back in trade on Tuesday. And you can trade this when it reports earnings before the bell on Friday.

We're very close to seeing new lows for the year, as at last trade we saw 10591 for JPMorgan.

As for the other three on Friday, the biggest US mortgage lender, Wells Fargo, expected to post earnings of $1.10 per share. That's a 17% decline according to refinitive. Revenue is expected to fall by around about 1% to $18.75 billion.

Citigroup you can see that earnings per share $1.49 on revenues of $18.38 billion and as for Morgan Stanley, the one major US bank that does not trade all-sessions on the IG platform, analysts anticipate earnings of $1.52 and revenues to reach $13.23 billion.

All these companies are reporting on Friday before the bell.

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