JPMorgan, Goldman Kick Off Big Bank Earnings as Rising Yields Loom

Bank earnings season starts Tuesday, and it arrives at a tricky moment. JPMorgan Chase, Goldman Sachs, Citigroup and Wells Fargo all report before the bell, with Morgan Stanley and Bank of America following Wednesday.

As CNBC noted, the S&P 500 hit an all-time high last week but has been volatile on rising Treasury yields and elevated oil prices. Those raise worries that the Federal Reserve could hike again to fight inflation.

That makes the banks an early read on the economy. Reuters reported that investors will scrutinize results for signs that the yield spike may curb dealmaking and lending growth, and raise funding costs across the industry.

Start with JPMorgan. It reported a 41% year-over-year earnings jump last quarter, and analysts expect double-digit growth again. Bespoke Investment Group data shows JPM beats estimates 82% of the time, but the shares fell after four of its last five reports.

Goldman has an even stronger record. It has topped expectations for 12 straight quarters, and the stock rallied 9% after the last report. Analysts polled by LSEG see revenue up about 10% and earnings up around 6%.

TD Cowen initiated Goldman at buy last week, and its analysts made the bull case plainly.

"Put simply, we believe GS has better cemented its foundation, while the environment has created more open space above." — TD Cowen analysts

Citigroup posted its highest quarterly revenue in a decade last quarter. Jefferies analyst David Chiaverini, who rates it a buy, sees an improving return profile and rising capital returns that could re-rate what he calls the cheapest money center bank.

The catch: Citi's stock has dropped after two of its last three reports. A strong number alone hasn't been enough.

Wells Fargo is the one to watch for a rebound. Its shares are down 13% over the past month, the biggest drop among the six major banks. Earnings have beaten for 10 straight quarters, yet the stock fell after seven of those releases.

Wednesday brings Morgan Stanley and Bank of America. Morgan Stanley's shares rose after each of its last four reports, and revenue is expected to be up nearly 10%. Citizens analyst Devin Ryan expects trading revenue to fall sharply from the second quarter and has trimmed his investment banking forecast.

Bank of America is forecast for single-digit earnings and revenue growth. Barclays analyst Jason Goldberg expects net interest income to rise 2% from the prior quarter, though he thinks trading and investment banking fees could lag peers.

Here's the pattern that should shape your plan. Beating estimates isn't the problem for these banks. The stock reaction is, because expectations are already high. Wells Fargo's record of beating and then falling is the clearest example.

What to listen for on the calls: guidance on net interest income and expenses for 2027, any comment on loan demand, and what bankers say about the deal pipeline. Seaport Research Partners flagged that JPMorgan could guide expenses higher, even with a solid income outlook.

One more data point: Bank of America's stock averages a 0.6% decline on earnings days, though it rose after the last two releases. Small moves, but they show how much of the good news is already priced in.

The risk is that higher yields cut both ways. They can lift what banks earn on loans, but they can also slow borrowing, cool deals and stress consumers. Inflation data due this week could shift the Fed conversation too.

If you own bank stocks, avoid judging the sector on the first print. Compare results with the guidance and the stock's move. If you're buying, the pullback in names like Wells Fargo offers a more favorable starting point than a chase after a big pop.

Bottom line: this week tests whether record trading and dealmaking can outrun rising yields, so the commentary matters as much as the numbers.