US Banks Starts Reporting Q4 2024 Earnings: Here’s What Stock Investors Should Watch

TradingKey - Right now, talk of the (investing) town is the US Federal Reserve (Fed) and its Chairman Jerome Powell. That’s because the Fed has been recently more hawkish in its commentary on interest rates and, more importantly, has persuaded the market to dial back where it thinks interest rates are headed. 

One of the big beneficiaries of the massive run up in interest rates has been banks, mainly due to the arbitrage opportunity between deposit rates and the Fed Funds rate (or benchmark interest rate). 

A massive stock market rally over the past two years also hasn’t hurt profitability at the big banks, many of which have sizeable investment banking and trading operations. 

As earnings seasons kicks off in earnest in the US, the first big banks to report include the likes of JPMorgan Chase & Co (NYSE: JPM), Citigroup Inc (NYSE: C), and Goldman Sachs Group Inc (NYSE: GS) – all of which report on Wednesday (15 January) before the market opens.

Peers Bank of America Corp (NYSE: BAC) and Morgan Stanley (NYSE: MS) will report their earnings on Thursday morning before the market open. Here’s what investors should be watching heading into the banks’ latest Q4 2024 earnings.

Monitoring banks and the US economy

The big banks will be a great leading indicator of the health of the US economy, which has surprised investors to the upside in terms of recent data. Indeed, many investors will be closely watching banks’ loan growth rates in the latest quarter and whether consumers and businesses are feeling as optimistic as the data points suggest.

With new market highs in the US being set in the fourth quarter of 2024, expectations are for trading volumes coming out of the big banks to be elevated across the period. That should result in some strong numbers for banks that have robust trading divisions, like JPMorgan and Goldman Sachs.

For the big giant – JPMorgan – analysts are expecting the country’s biggest bank to post overall revenue of US$41.9 billion, representing a 4.8% year-on-year increase. Meanwhile, total trading revenue is expected to rise 13.2% year-on-year to US$6.6 billion. 

On the other end of the spectrum, more specialized banks like Goldman Sachs will be more reliant on investing banking and trading revenues. In Q3 2024, Goldman reported a massive 45% year-on-year jump in net profit as a rise in dealmaking helped boost the bank’s income.

Investment banking fees for Goldman in Q3 2024 rose 20% year-on-year in Q3 2024 as more companies issued debt. Clearly, investors will be hoping for a repeat performance when the bank reports on Wednesday as the firm’s share price is up around 48% in the past year alone.

Looser regulation and deal pipelines

One of the big winners from the presidential election victory of Donald Trump has been the financials sector. That’s mainly been down to hopes of de-regulation and less stringent rulemaking.

Investors will be hoping to see banks be given more breathing room to lend or engage in certain activities once the Trump administration takes power on 20 January. 

The recent resignation of Michael Barr – who served as the Vice Chair of Supervision at the Fed – has fuelled speculation that banks may step up returning capital to shareholders via increased buybacks and dividends given potentially less capital-intensive requirements for the sector.

Furthermore, increased mergers and acquisition (M&A) activity has meant that investors and analysts will be closely monitoring managements’ guidance on their deal pipeline and how healthy that is looking. Capital markets activity has been picking up and better visibility on dealmaking could be a catalyst for banks to run further.

What else to watch with US banks

Beyond that, the usual metrics – such as Return on Equity (ROE) and the amount of any capital provisions – will be watched closely. 

As for banks, they’ve all had a strong 2024 with Goldman leading the pack and JPMorgan (41%), Citi (37%), Morgan Stanley (35%), and Bank of America (31%) all posting share price gains of over 30% for the year, easily outperforming the benchmark S&P 500 Index. 

If the latest earnings season surprises to the upside then shares in US banks could have another strong year in 2025.