Banks opening the III quarter’s earnings season

Bank earnings indicators will set the stage for the third-quarter reporting season, which is expected to be accompanied by economic outlook reports from corporate executives about the state of their businesses, lower earnings per share estimates on Wall Street, and in general, more moderate results because of price and interest rate pressures. 

JPMorgan, Citigroup, Wells Fargo and Morgan Stanley are due to report next week, along with Goldman Sachs and Bank of America.

Banks usually benefit from the central bank's tightening policies because higher interest rates increase their net interest income (the bank's income from lending activities and the interest it pays to depositors) and their net interest margin. However, difficult market conditions that have negatively impacted deal-making and general macroeconomic uncertainty may offset higher net interest income.

Analysts at Bank of America  forecast a slowdown in bank and brokerage earnings growth to 2,0% year over year in the Q3 from 5,9% in the second and 7,7% in the third, according to rising consensus forecasts. 

However, according to BofA, this drop pales in comparison to expectations for sectors outside the financial sector, with the exception of the energy sector. Earnings growth in those areas is expected to "fall into negative territory", the bank warned in a note, with expectations for -4,2% year-over-year growth in the third quarter, up from -1,3% in the second quarter.