Consumer Strength
U.S. consumers can still be counted on to help boost bank results, with spending holding up amid a healthy job market. And credit quality is strong as well, despite signs of a looming downturn.
Some banks may signal caution about the near future. Katzke expects JPMorgan to boost its loan-loss provision 40% from the second quarter even as charge-offs fall as the bank builds its reserve for future problems.
“As it stands right now today, the consumer is doing really well on credit quality,” even as borrowing has increased recently, Graseck said. “When does all that lending start to turn into more issues?”
Banking Fees
The worst quarter in more than two years for announced mergers and some unwanted drama in the market for initial public offerings added up to a weak period in investment banking. Revenue from that business will be down 4% on average from last year’s third quarter, Katzke estimated.
September featured We Co.’s postponement of its IPO -- which was supposed to be the second-largest of the year -- and the flops of high-profile offerings from SmileDirectClub Inc. and Peloton Interactive Inc. That may weigh on the market for IPOs in the fourth quarter.
That disappointment will also probably show up in lower valuations for banks’ stakes in the company. Earlier this month, Jefferies Financial Group Inc. said it wrote down the value of its investment in We by $146 million. Goldman Sachs will take a $264 million hit on its We stake, according to Graseck at Morgan Stanley. Goldman Sachs may also post losses in the quarter totaling about $260 million from its stakes in four companies, including Uber Technologies Inc. and Avantor Inc., based on filings and company disclosures.
This article provided by Bloomberg News.