JPMorgan Chase (JPM) will kick off the second-quarter earnings season on Thursday, as investors and analysts continue to express concerns over results for banks and other financial services firms.
Analyst estimates put JPMorgan’s Q2 EPS for 2016 at $1.43, down 7% from a year ago.
Banks are being hurt by weak economic growth in China, low oil energy prices and volatility in asset markets caused by the Brexit vote, all of which negatively affect the capital markets and banks’ trading and investment businesses.
Along with JPMorgan, BlackRock and First Republic Bank report earnings on Thursday. Wells Fargo (WFC), Citigroup and other banks will report Friday, while Bank of America (BAC) will share its latest financial news on Monday.
“Without any help from interest rates, bank revenue growth will have to come from asset growth and other income,” said Erik Oja, a banking analyst at S&P Global Market Intelligence, in a recent report.
Second-quarter earnings for banks in the S&P 500 index are set to drop by nearly 12%, according to FactSet. Morgan Stanley (MS), which will report its second-quarter results next Wednesday, could see a roughly 26% decline in EPS year over year.
“Brexit’s direct impact on the U.S. banking industry is not expected to be material, but the unintended consequences could be far-reaching,” explained analyst Gerard Cassidy of RBC Capital Markets, in a recent report.
The Federal Reserve, for instance, is not poised to raise short-term rates for at least another year, according to Cassidy, which will hurt banks’ profits – as well as those of broker-dealers.
The combined net income at the six biggest U.S. banks could decline 18% in the second quarter from a year earlier, according to analysts surveyed by Bloomberg. For the full year, they say, the group’s total earnings are expected to weaken by 14%.
This comes on the heels of a 12% drop in the first quarter.
Bank of America, for instance, could be hurt by a drop in its net-interest margin, according to KBW.
“The decline in long-term rates during the second quarter does give us pause that the margin may come in worse than we expect,” the research firm said in a report on Wednesday. “In addition, we remain focused on expenses. and the change in segment reporting ahead of quarterly results could make it difficult to track BAC’s progress on reducing expenses in the former Legacy Asset Servicing segment.”