Results from JPMorgan Chase and other big banks could set the tone for the rest of the first-quarter earnings season.
Following two of the biggest bank failures in the nation’s history, results from some of the nation’s financial bellwethers this week are likely to set the tone for the rest of a shaky earnings reporting season.
“Every income statement line item is in flux and the degree of confidence in our forecast is lower as the probability of a sharper slowdown increases,” Morgan Stanley analyst Betsy Graseck said in a note on Wednesday.
He also said that last month’s bank failures could spur more customers to open up multiple accounts at different banks, following bigger concerns about what would happen to the money in a bank account that exceeded the $250,000 limit covered by the FDIC. But as the recent banking disturbances trigger Lehman flashbacks, he said that the recent banking failures were the result of poor management and insufficient risk controls specific to those financial firms.
JPMorgan JPM Chief Executive Jamie Dimon has said that Trump-era banking deregulation didn’t cause those bank failures. But in his annual letter to shareholders last week, he also said that the current turmoil in the bank system is not over. However, he also said that the collapse or near-collapse of Silicon Valley Bank and its peers “are nothing like what occurred during the 2008 global financial crisis.
The Federal Reserve’s decision to raise interest rates, along with a broader pullback in digital demand following the first two years of the pandemic, stanched the flow of tech-industry funding into Silicon Valley bank and caused the value of its bond investments to fall.But the impact of those higher interest rates — an effort to slow the economy and, by extension, bring inflation down — will be felt elsewhere. First-quarter earnings are expected to decline 6.
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