On Friday, the first financial reporting season of the US stock market will kick off, with several large banks taking the lead in releasing their financial reports. Analysts generally predict that the first quarter profits of large banks in the United States will be weaker than the same period last year, but the market is more concerned about banks' expectations for full year performance.

2023 Performance Review

For most of 2023, large banks such as JPMorgan Chase, Wells Fargo, Citigroup, and Bank of America have shown strong profit performance, while regional banks face challenges.

Q1 2024 Expectations

Analysts predict that the profits of these large banks in the first quarter of 2024 will increase compared to the fourth quarter of 2023, but will decrease compared to the same period last year. This is mainly due to a slowdown in loan demand and an increase in the difficulties faced by some borrowers, especially the expected 76% increase in bad debts of credit card loans.

Stock market reaction

Although the performance in the first quarter may not be satisfactory, investors remain optimistic about large banks due to market expectations that the Federal Reserve will maintain a high interest rate environment. As of this year, Citigroup's stock price has risen by over 18%, and both JPMorgan Chase and Wells Fargo have seen gains of over 15%.

The overall economy and inflation impact

The strong economic data and persistent signs of inflation have lowered traders' expectations for the Federal Reserve's interest rate cuts this year from six at the beginning of the year to one or two, which is a big boost for large banks as it helps them increase loan rates while maintaining lower capital costs, thereby boosting net interest income.