The US earnings season begins Friday with Wall Street’s major banks set to release their first-quarter results, offering critical insights into how financial institutions are navigating a volatile economic landscape shaped by sweeping new trade tariffs.
Leading the reporting lineup are JPMorgan Chase and Wells Fargo, with Bank of America, Citigroup, and Morgan Stanley due to follow next week. Analysts expect these banking giants to post solid quarterly earnings, thanks to a resilient US economy in early 2025. However, investor focus is shifting toward forward guidance, with expectations of more cautious outlooks amid escalating trade tensions.
The earnings come after a turbulent week in the markets triggered by President Donald Trump’s announcement of broad tariffs, including a 10% blanket levy on nearly all imports, which has raised fears of a potential slowdown in global trade. Banking stocks, once top performers, have been hit hard. JPMorgan and Wells Fargo, which had gained around 13% earlier in the year, have since dropped more than 20% amid market jitters.
“Trade developments move our base case to a significant GDP slowdown,” noted Betsy Grasek, an analyst at Morgan Stanley, who downgraded the banking sector to “in line.” She warned that investment banking revenues—especially from M&A and equity issuance—are at risk due to reduced capital market activity and rising recession fears.
Dilin Wu, a strategist at Pepperstone Australia, echoed the concerns, highlighting that “banks may need to face higher credit loss provisions” as economic uncertainty drags on lending and credit quality. He added that volatility caused by tariffs could also limit activity in financial markets, further impacting bank profitability.
Investors will be watching closely for any downward revisions or removal of forward guidance from bank executives. “These harsh realities mean markets must now price in hits to corporate profits,” said Kyle Rodda, a senior market analyst at Capital.com.
Meanwhile, the Federal Reserve is facing its own dilemma. Rising inflationary pressures tied to tariffs have complicated the central bank’s interest rate path. On Thursday, Boston Fed President Susan Collins suggested that further rate cuts may be delayed. While higher interest rates can benefit banks through better net interest margins, they may also slow consumer spending and loan demand—creating a mixed outlook for net interest income (NII).
Despite the uncertainty, analysts still expect strong first-quarter earnings. According to Reuters, JPMorgan is projected to report earnings per share (EPS) of $4.61, up 3.8% year-on-year, while Wells Fargo is forecast to see a 3.3% rise to $1.24. Bank of America is expected to post EPS of $0.82 (an 8% increase), Citigroup $1.86 (up 18%), and Morgan Stanley $2.22 (a 10% gain).
Though bank earnings remain strong for now, all eyes are on what lies ahead as global trade disruptions and shifting monetary policy continue to reshape the economic landscape.
