Fears of a US recession still loom large, and another bank-heavy roster of earnings this week will offer further insight into the macroeconomic outlook even as investors digest results from the first batch of lenders that reported last Friday.
(Bloomberg) — Fears of a US recession still loom large, and another bank-heavy roster of earnings this week will offer further insight into the macroeconomic outlook even as investors digest results from the first batch of lenders that reported last Friday.
With a surprise jump in deposits at JPMorgan and a shift of funds to higher-yielding alternatives at Wells Fargo, further deposit-flow disclosures from Bank of America and Charles Schwab this week will be scrutinized.
Meanwhile, global investment banks Goldman Sachs and Morgan Stanley are likely to face questions from investors about the competitive implications of UBS’ acquisition of Credit Suisse last month.
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Highlights to look for this week:
Monday: Charles Schwab (SCHW US) will report before the open. The pace at which yield-hungry clients are shifting cash from low-interest-rate bank accounts to money-market funds remains a focal point, even after the company flexed its franchise strength to assure investors that it has grown net new client assets and possesses sufficient liquidity. Eyes will be on the firm’s net interest margin trajectory in 2023 as there’s lingering concern about outflows that could force Schwab to rely on higher-cost funding, Bloomberg Intelligence says.
- Read more: Schwab Faces Fresh Risks in the Zero-Fee Landscape It Shaped
Tuesday: While Bank of America (BAC US) may have benefited from a flight to quality following the regional banking turmoil, rising costs could cut into net interest income, Bloomberg Intelligence says. Investors will look at how the lender manages deposit costs and size up the health of its commercial real estate loan book, particularly with regard to office properties. Earnings are due premarket.
- Also due before the bell is Goldman Sachs (GS US). The financial services giant’s expense goals are “pivotal” to boosting returns, and any signs of progress in a $1 billion cost-cutting plan laid out at its investor day could bolster confidence, BI says. Limited IPOs and M&A will result in another double-digit year-on-year decline in investment-banking revenue, though that drop has narrowed sequentially. Executives could also discuss recent changes to Goldman’s equity trading team.
- Western Alliance (WAL US) reports after the close and whether it can allay investor concerns about outflows will be of particular interest after its disclosure of an 11% decline in first-quarter deposits. Bloomberg Intelligence sees strength in Western Alliance’s top-line growth but notes that the bank could see higher funding costs as it “potentially pays up in order to retain deposit relationships.”
Wednesday: Like rival Goldman, Morgan Stanley (MS US) could be asked by investors to elaborate on the possible ramifications of UBS’ takeover of Credit Suisse on its business. Cost control as well as fee-based flows will also be scrutinized for implications on its outlook, Bloomberg Intelligence says. Consensus sees the wealth management unit reporting $24 billion in fee-based inflows for the first quarter, 85% down from the last period. Net revenue at the segment, another closely watched metric, is projected to gain 9%, an improvement from the 0.4% fall last year. Jefferies says the unit is well positioned to expand market share in light of recent regional bank collapses. Morgan Stanley reports before the opening bell.
Thursday: American Express (AXP US), reporting before the market open, is set to benefit from a rebound in travel and dining, as well as its still resilient premium-consumer base in its key US market. The growth of its network volume, projected to accelerate to 14% from 12% in the previous quarter, could outpace rivals Visa and Mastercard.
- Regional banks Fifth Third Bancorp (FITB US) and KeyCorp (KEY US) are also due premarket. Both lenders are expected to see modest deposit attritions of about 1% from the prior period, according to Bloomberg consensus. Deposit costs will be under scrutiny in KeyCorp’s report, BI says.
Friday: Procter & Gamble (PG US) will post third-quarter results before the opening bell. While organic revenue could grow at its slowest pace in at least a year, declines in adjusted earnings and organic volume are projected to narrow from levels seen in the prior quarter. The easing of supply-chain snarls and lifting of pandemic restrictions in China bode well for the maker of personal-care goods, Jefferies says, echoing the optimism at JPMorgan which raised its recommendation last month on the shares to overweight from neutral.
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