JPMorgan Earnings Are Coming. What to Expect.

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Another bank earnings season is upon us.

JPMorgan Chase

will step up to the plate first, offering investors a sense of how lenders have fared over the past quarter amid a slowing economy.

Expectations for the sector are muddled, with analysts projecting banks to post an increase in net interest income due to rising rates while also preparing themselves for a downturn. The sector looks healthy overall: Big banks passed the Federal Reserve’s annual stress test last month. But Wall Street expects that profit—no longer buoyed by a robust deal making climate—will be under pressure.

That is expected to happen at

JPM

organ (ticker: JPM). Analysts surveyed by FactSet expect the bank to post second-quarter earnings of $2.89 per share, down nearly 25% from a year ago. Revenue is projected to creep up by 4% to $31.8 billion.

JPMorgan has been one of the harder-hit bank stocks this year. Shares are down nearly 30%, outpacing the 20% drop in the

SPDR S&P Bank exchange-traded fund

(KBE). Shares faltered earlier this year when the bank posted higher-than-expected expenses due to salary increases and business investments. And in April, JPMorgan posted a miss on profit.

The bank redeemed itself in May when it reiterated that it expects return on tangible common equity (ROTCE)—a measure of profitability—to hit 17% this year, a rosy outlook that signaled the bank’s confidence it will benefit from rising interest rates despite an expected drop off in capital markets activity.

Growing net interest income is one way for the bank to hit its ROTCE target with analysts expecting second-quarter net interest income to be $15 billion, up from $12.9 billion a year ago. JPMorgan should also see a year-over-year increase in trading revenue thanks to recent market volatility.

As is true in most earnings seasons, Wall Street will be just as—if not more—interested in the bank’s forward guidance. Going into this earnings season, bank executives are mindful of economic headwinds but confident in their client’s financial health. Investors will see if that thinking has changed in light of persistently high inflation.

Morgan Stanley (MS) also reports results Thursday, while

Citigroup

(C) and

Wells Fargo

(WFC) share their second-quarter results before the bell Friday.

Bank of America

(BAC) and

Goldman Sachs

(GS) will report on Monday.

Write to Carleton English at [email protected]