The U.S. banking industry's third-quarter earnings season kicks off this week, with three of the largest U.S. banks expected to report results before markets open Friday, Oct. 12.
Analysts expect JPMorgan Chase & Co., Wells Fargo & Co. and Citigroup Inc. to report higher third-quarter earnings year over year.
For JPMorgan, the S&P Global Market Intelligence consensus estimate for normalized third-quarter earnings per share is $2.28, higher than its year-ago EPS of $1.76. CFO Marianne Lake said that while higher loan loss reserves are expected as a result of the shift to the current expected credit loss model, the shift "doesn't change the economics of the loans" and is not going to fundamentally shift dynamics.
Analysts also expect Wells Fargo to report higher third-quarter EPS, at $1.18, versus the 84 cents recorded in the same quarter in 2017. The company, which remains under scrutiny by regulators and federal agencies over various alleged transgressions, is planning to reduce its workforce by about 5% to 10% in the next three years. This plan is in-line with the company's plan to decrease its branch network to 5,000 by the end of 2020.
For Citi, analysts expect the New York-based company to report third-quarter EPS of $1.67, up from the year-ago figure of $1.42. CFO John Gerspach said tax reform boosted the company's efforts to improve its return on tangible common equity, or ROTCE, allowing Citi to revise its goals and outlook. Citi raised its ROTCE target to 13.5% or higher by 2020, and believes it could hit 14% to 16% in the long term.