Details Cookies
Important margin product information
CFDs and forex spot transactions are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor lose money when trading CFDs and/or forex spot with this provider. 0.42% of retail clients trading in leveraged products experience a negative account balance after a stop out occurred. You should consider whether you understand how CFDs, forex spot transactions or any of our other products work and whether you can afford to take high risk of losing your money.
Cookie policy

This website uses cookies to offer you a better browsing experience by enabling, optimising and analysing site operations, as well as to provide personalised ad content and allow you to connect to social media. By choosing “Accept all” you consent to the use of cookies and the related processing of personal data. Select “Manage consent” to manage your consent preferences. You can change your preferences or retract your consent at any time via the cookie policy page. Please view our cookie policy here and our privacy policy here

US Banks Kick Off Earnings US Banks Kick Off Earnings US Banks Kick Off Earnings

US Banks Kick Off Earnings

Equities 6 minutes to read

Summary:  Earnings season kicks off this week with US financials dominating the initial releases. Last earnings season the financials were index laggards reporting disappointing results as the COVID crisis raged. This 3Q earnings season will no doubt confirm the sector remains under pressure, and very much in the eye of the COVID storm, but low expectations and falling loan loss provisions, alongside FICC revenues bolstering results could see the bigger banks in particular meeting and beating the lowered bar.

3Q earnings season begins this week, with the big US banks kicking off the show. Citigroup and JPMorgan Chase are first up on Tuesday, followed by Bank of America, Goldman Sachs Group, and Wells Fargo on Wednesday. Morgan Stanley reports on Thursday.

More broadly this earnings season will provide investors with an update on company fundamentals which is likely to cement the picture of the “K-shaped recovery” that we see represented in the stark divides between COVID winners and losers. The divergence visible not only at an index level when we look at the divergent recovery trajectories for technology stocks vs. for example, energy or travel and leisure stocks, but also throughout the economy as a whole. Large vs. small companies, white collar worker vs. frontline, automation vs. human contact, asset rich vs. otherwise. Although with financial markets settled into the present liquidity driven paradigm, these dynamics matter more for the real economy and its social fabric.

However, as earnings kick off risky assets are more focused on the ongoing fiscal stalemate, paused vaccine trials and the upcoming election, where increased odds of a “blue wave” and substantial stimulus spend in the new year is supporting sentiment. We are just 3 weeks out from the election and although investors seem comfortable with the prospect that another round of fiscal spending may not eventuate prior to the election, remaining focused on the prospect stimulus is coming at some point, whoever wins, there remains a lot of noise with respect to news flow. This supports the notion of choppy, rangebound markets until the election is out of the way. It is true that the trajectory of both fiscal and monetary policy, alongside the economic recovery path and the prospects of a vaccine will outweigh the election result, but there remains some ground to cover until we get there with a potentially noisy period for news flow to traverse in between.

What to watch as banks kick of 3Q earnings this week:

  • The economic backdrop, although troubled, has improved. The sector remains under pressure, but the outlook is improving and a lowered bar makes it easier for financial to meet expectations.
  • Loan loss provisions have been front loaded with significant 1H expenses and should decline on the quarter, reserve set-asides will be less than they were during in 1H 2020.
  • Declining provisions will help the sector reports in 3Q. Although, depending on the trajectory of the virus and treatment programmes/vaccine rollout we may not be out of the woods with respect to future loan loss provisions.
  • If loan loss provisions do decline, this may help keep intact recent price action across the sector as investors contemplate the prospects of the eventual economic recovery and eventual reserve releases.
  • Investment banking activity and IPO flow remains supportive of revenues.
  • Low rates dent profitability. Lower Treasury yields constrain profit margins, monetary policy is a key driver here. 10yr Treasury yields remain near record lows collapsing net interest incomes. Declining credit card activity has also been a factor negatively impacting net interest incomes. These factors will weigh on 3Q results and beyond.
  • FICC revenues are expected to remain strong with volatility continuing into 3Q but are unlikely to repeat the blowout 2Q performance.
  • Loose monetary policy remains supportive of capital markets and trading activity. In many ways performance of this revenue line highlights the “K-shaped” recovery. Large banks with diversified business lines will outperform smaller banks more reliant upon lending.
  • Cost cutting and lay offs remain a focal point, outside of stimulus fueled financial markets in the real economy, the K shaped world that is being entrenched by the COVID-19 recession continues. The latest jobs data revealing the share of permanent unemployed is picking up, highlighting the requirement for ongoing fiscal support targeted within parts of the economy that continue to lag.

In recent weeks US banks have outperformed the broader index in tandem with the reflation narrative that has driven risky assets. 3Q earnings should confirm this momentum given the lowered bar to meet and beat expectations.

However the earnings themselves are less important in the current environment. What matters more for the share prices is:

  • The prospects of a large reflationary fiscal stimulus package, alongside a steeper yield curve supporting pro-cyclical allocations
  • These prospects go hand in hand with the election outcome
  • The COVID recovery trajectory and timing on a vaccine promoting the return to normal
  • Central bank policy, monetary policy remains extremely loose with unprecedented measures abound

The reflationary narrative that has gripped market sentiment, bolstered by the increased probability of a democratic sweep, supports a steeper yield curve and could be positive for the US banks into 2021/2022. A steepening yield curve means widening profit margins for banks, who borrow short and lend long, although more broadly lower yields relative to cycle highs will still constrain interest margins.

The US desperately needs the next round of fiscal stimulus – stimulus gap may emerge in Q4 economic data with no deal on Capitol Hill prior to the election. US 3Q financial sector reports are likely to highlight the fact that unprecedented government and central bank stimulus has been critical.

Better 3Q results for the big US banks aside, it is stimulus that has driven the economy in recent months, and has been critical in averting the worst case scenario for the economy. In many ways bridging the gap between crisis and the post pandemic return to normalcy. The present gridlock in Washington increases the risk of economic scarring with unnecessary layoffs and business closures that may occur with the stimulus gap in play. A concerning dynamic which will be negative for consumption down the track, the recovery momentum is too fragile to go without and monetary policy is pushing on a string.


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (
Full disclaimer (

Saxo Bank (Schweiz) AG
Beethovenstrasse 33

Contact Saxo

Select region


All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law.

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.