Earnings season has arrived, check the earnings forecasts of the top 24 Q4 US banks in a list! With the easing of regulations under Trump 2.0, the industry's profit share of the top four US mega banks is at its highest level in 10 years?

moomooニュース米国株 wrote a column · 3 hours ago

This article utilizes auto-translation in some parts.

As the curtain rises on the 24Q4 earnings season in the US market, on January 15, 2025, just before the opening (23:30 Japan time on the night of the 15th), leading US banks will be $Goldman Sachs (GS.US)$ 、 $JPMorgan (JPM.US)$ 、 $Citigroup (C.US)$ 、 $Bank of New York Mellon (BK.US)$ 、 $Wells Fargo & Co (WFC.US)$When announcing the financial results, investors will be closely monitoring the future to understand the health of the American economy.

Looking back at 2024, large bank stocks showed strong overall price movements. Goldman Sachs and New York Mellon Bank recorded about a 52% increase, showing significant growth. Wells Fargo, JP Morgan Chase, Citigroup each saw over 40% increases last year, Morgan Stanley about 40%, and Bank of America around 34%. Furthermore, Citigroup recently hit an all-time high. Goldman Sachs, Wells Fargo, JP Morgan Chase, among others, also hit historic highs at the end of November last year.

Earnings season has arrived, check the earnings forecasts of the top 24 Q4 US banks in a list! With the easing of regulations under Trump 2.0, the industry's pr...

MOOMOO's compiled market forecasts.are as follows.
$Goldman Sachs (GS.US)$Bank of America is expected to have revenue of 12.424 billion dollars, a 9.77% increase from the previous year, and an EPS of 8.35, an increase of 52.37%.
$JPMorgan (JPM.US)$Chase Corp is expected to have revenue of 41.583 billion dollars, a 7.80% increase from the previous year, and an EPS of 4.09, an increase of 34.54%.
$Citigroup (C.US)$has a revenue of $19.512 billion, an 11.88% year-on-year increase, and is expected to have a positive EPS conversion to 1.23. Bank of America
$Bank of New York Mellon (BK.US)$is expected to have a revenue of $4.657 billion, an 8.03% year-on-year increase, with an EPS forecasted to increase by 366.67% to 1.54.
$Wells Fargo & Co (WFC.US)$is expected to have a revenue of $20.577 billion, a 0.48% year-on-year increase, with an EPS forecasted to increase by 56.98% to 1.35.
$Bank of America (BAC.US)$is expected to have a revenue of $25.098 billion, a 14.29% year-on-year increase, with an EPS expected to increase by 120.00% to 0.77.
$Morgan Stanley (MS.US)$is predicted to have a revenue of $14.992 billion, a 16.25% year-on-year increase, with an EPS expected to increase by 96.47% to 1.67.
$UBS Group (UBS.US)$is expected to have a revenue of $6.985 billion, a 3.30% year-on-year increase, with an EPS expected to increase by 114.29% to 1.05.

The four major US banks are at the highest industry profit share in the past 10 years.
According to statistics, $JPMorgan (JPM.US)$ 、 $Bank of America (BAC.US)$ 、 $Citigroup (C.US)$ 、 $Wells Fargo & Co (WFC.US)$In 2024, the four major banks in the USA are expected to achieve the largest industry profit share in the past 10 years. This indicates that these banks are further strengthening their market dominance. According to reports based on data from the industry tracking agency BankRegData, the total profits of the four largest banks in the first 9 months of 2024 reached approximately $88 billion.

There are over 4000 banks in the United States, but the profit share of the four largest banks accounts for 44%, the highest level since 2015. Based on the top 7 banks in deposit size (including American Bank, PNC, and Truist), they represent about 56% of the banking industry's profits in the first 9 months of this year, significantly surpassing the 48% from the same period in 2023. This shows that the major banks are further strengthening their market dominance.

These data are based on financial reports submitted by each bank to the Federal Deposit Insurance Corporation (FDIC) and are limited to banking operations in the United States. The scope of reporting varies for each bank, with data from JP Morgan Chase and Bank of America including revenue from investment banking and trading operations, while many small and medium-sized banks do not engage in these areas, widening the profit gap between major and smaller banks.

Furthermore, against the backdrop of performance improvements and optimistic outlook for next year, executives of Wall Street's largest investment banks are proceeding with plans to increase year-end bonuses. Bonuses in many departments are expected to increase by over 10%. According to reports, at Bank of America, the average bonuses for investment bankers and traders in the equity and fixed income divisions are expected to increase by over 10%, and traders at Morgan Stanley are also expected to see an increase of over 10%. Bonuses for JP Morgan's investment bankers are expected to increase by about 15%, and Goldman Sachs plans to pay even larger bonuses in some trading divisions.

Recovery trend in market trading and investment banking operations at major Wall Street banks
Wall Street's major banks' market trading and investment banking businesses are showing signs of recovery. After two years of decline, they have finally reached a turning point. According to analysts' estimates, except for fixed income, foreign exchange, and commodity (FICC) trades, all other department revenues of major banks around the world are expected to increase for the first time since 2021, making it a potentially profitable year.

Regarding investment banking, the revenue of Wall Street's major banks is expected to increase in 2024, putting an end to the two-year 'drought period'. According to Dealogic data as of December 17, 2024, investment banking revenue is expected to reach the third-highest level in the past 10 years. Although it does not reach the peak of 2021, Goldman Sachs' CEO Solomon predicts that performance will further improve next year with expanding trades and simplification of M&A approval processes by the new US government.

Brian Moynihan, CEO of Bank of America, stated in December that the company's investment banking revenue is expected to increase by at least 25% year-on-year. At the same time, sales and trading operations are also expected to reach their highest level.

According to Moynihan, as trading continues to increase, investment banking revenue in the fourth quarter could exceed $1.4 billion. Analysts predict that revenue from the same department will approach $1.5 billion, representing an increase of approximately 27%. Moynihan also mentioned that Bank of America's sales and trading operations are expected to record growth year-on-year and achieve high single-digit growth in the fourth quarter. Analysts forecast market revenue to increase by 8.2% and reach $460 billion.

The beginning of the Trump 2.0 era, expectations for banking deregulation.
As Mr. Trump prepares to take office as the 47th President of the United States on January 20, 2025, the banking industry is attracting attention as an important investment opportunity. The market predicts that Mr. Trump may revive financial deregulation policies, which are expected to improve the leverage, profitability, and dividend payment capabilities of banks.

According to reports, Mr. Trump is considering some changes to the banking industry's regulatory agencies, with the transition team exploring the possibility of significant reduction, integration, or elimination of the top regulatory institutions in banking. On the other hand, Treasury Secretary Yellen has raised concerns, emphasizing the need not to hinder appropriate regulations on US bank capital levels, liquidity, and risk management, as these regulations are crucial for maintaining the soundness of the banking system.

On January 6, the Federal Reserve System (FRB) announced on its official website that Michael Barr, the Vice Chairman responsible for financial regulation, would resign. Market analysts point out that Barr's resignation may be related to Mr. Trump's inauguration as president.

Mr. Barr played a significant role in negotiating the U.S. version of the Basel regulations under the Biden administration. In the new rule proposal for banking regulations announced by U.S. regulatory authorities such as the FRB in July 2023, banks with assets exceeding $100 billion are required to increase their capital ratio by about 16%, and the eight major banks including JP Morgan and Citigroup may be required to strengthen their capital by around 19%.

Executives and industry groups on Wall Street have been critical of the capital requirements of the FRB for many years, and their resistance has intensified especially after the introduction of the new rules in 2023. On December 24, 2024, U.S. banks and trade organizations filed a lawsuit against the FRB, claiming that the design process of stress test criteria was opaque and lacked public input. As a result, the bank's capital requirements led to significant unpredictable fluctuations.

As Mr. Barr, a key figure in financial regulatory policy, resigns as Trump's inauguration approaches, there is an increasing possibility of some concessions from regulatory authorities in the U.S. banking industry. Market participants believe that if the expectations of regulatory easing and tax cuts by the new Trump administration materialize, there is further room for bank stocks to rise.

The analyst team led by Vivek Juneja of JP Morgan points out in the 2025 major bank outlook report, "2025 is expected to be a tumultuous year with clearly distinct phases." While policy changes may cause short-term market volatility, there is a positive view that potential improvements in capital requirements will drive long-term growth in the banking industry.

Goldman Sachs Group Inc
with a market capitalization of approximately $179.8 billion $Goldman Sachs (GS.US)$Is scheduled to announce the earnings for the fourth quarter of 2024 before the US market opens on January 15th. According to market estimates compiled by MOOMOO, Goldman Sachs Group Inc (GS) is expected to achieve a 9.77% increase in revenue to $12.424 billion and a 52.37% increase in EPS to 8.35. Goldman has exceeded analyst expectations for the past four consecutive quarters.

Goldman Sachs' stock price has increased by 48.4% over the past year, outperforming the S&P 500 (23.3%) and the Financial Select Sector SPDR ETF (28.5%). The performance in the third quarter was mixed, with market trading revenue decreasing by 19.2%, but the investment banking and asset management divisions showing strong growth, and net interest income increasing by 69.6%.

According to the analyst ratings compiled by MOOMOO, the assessment of the majority of analysts (66.67%) is 'Bullish', with an average target price of $644.92.

JP Morgan
$JPMorgan (JPM.US)$The company is scheduled to announce its fourth-quarter earnings on January 15, 2025. According to market expectations compiled by MOOMOO, JP Morgan Chase (JPM) is expected to have a revenue of 41.583 billion dollars, a 7.80% increase from the previous year, and an expected EPS increase of 34.54% to 4.09.

There are several factors affecting the company's performance. Net interest income is expected to decrease by approximately 4.9% to $22.88 billion, while investment banking fees are expected to increase by over 43% due to increased M&A activities. Market revenues are forecasted to increase by 15% due to high volatility and strong customer activities. Residence loan bank business fees are expected to increase by 50% supported by stable refinancing and loan issuance volumes. On the other hand, operating expenses are expected to increase due to business expansion and technology investments.

JP Morgan's stock price has risen by 40.7% over the past year, outperforming its industry peers. According to the analyst ratings compiled by MOOMOO, the assessment of the majority of analysts (68.75%) is 'Bullish', with an average target price of $259.07.

Citigroup
$Citigroup (C.US)$The company is scheduled to announce its fourth-quarter earnings on January 15, 2025. According to the market estimates compiled by MOOMOO, Citigroup (C) is expected to have a 11.88% year-on-year increase in revenue to $19.512 billion and a forecasted EPS turning positive to 1.23. The company has recorded revenue exceeding market expectations for the past four consecutive quarters and has a stable performance.

Citigroup's stock price has risen by 36.8% in the past year, outperforming the S&P 500 index and the Financial Select Sector SPDR ETF. In the third quarter, revenue and growth in investment banking were strong, but profitability was affected by an increase in credit loss reserves. According to analyst ratings compiled by MOOMOO, a majority of analysts (81.25%) are 'bullish,' with an average target price of $86.50.

In the future, the Federal Reserve's rate cuts may push up net interest income, while loan delinquency rates remain stable. The company is also focusing on improving its regulatory processes. Analysts anticipate future growth potential, especially against the backdrop of a favorable political environment and expectations of regulatory easing due to the potential re-election of Donald Trump.

ーmoomooニュースZeber
Source: Bloomberg, MOOMOO
This article utilizes auto-translation in some parts.

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