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Bank earnings — What to know in markets Tuesday

Heidi Chung

Earnings season is here.

A slew of big banks are gearing up to release quarterly results Tuesday including Citigroup (C), Goldman Sachs (GS), JPMorgan Chase (JPM) and Wells Fargo (WFC).

Investors will get a read on how the lower interest rate environment has affected the rate-sensitive financials and their profitability during the third quarter. Net interest margin, the measure of interest collected on loans minus interest paid on deposits, will be closely monitored as the key industry metric has been under pressure in recent quarters.

“Our analysts believe that quarterly trends (net interest margin compression, still-decent loan growth, strong mortgage banking trends and carefully managed expenses) are well understood by investors, and expect macro factors to be more impactful to sector performance than industry-level fundamentals,” Bank of America Merrill Lynch wrote in a note to clients Monday.

JPMorgan Chase & Co. CEO Jamie Dimon. (Photo by Jim WATSON / AFP) (Photo credit should read JIM WATSON/AFP/Getty Images)

Citi (C) is expected to report adjusted earnings of $1.95 per share on $18.54 billion in revenue, while Goldman Sachs (GS) is expected to report adjusted earnings of $4.86 per share on $8.31 billion in revenue. Analysts expect JPMorgan Chase (JPM) to report adjusted earnings of $2.46 per share on $28.47 billion in revenue, and adjusted earnings of $1.14 per share on $21.17 billion in revenue for Wells Fargo (WFC).

The financials sector (XLF) rose 17% this year, while the broader market S&P 500 (^GSPC) is up 20% in the same time period.

[Read more: Bank earnings preview – ‘Chipping away’ at expenses amid a tough environment]

Wall Street’s outlook for earnings season is bleak. Analysts expect that S&P 500 earnings per share will fall 3% from the same period last year, which represents the first profit decline since 2016. “Negative S&P 500 EPS growth in 3Q will be driven by sectors with the highest international revenue exposure: Energy (-31%), Information Technology (-9%), and Materials (-7%). With more than 40% of sales derived abroad, Energy, Info Tech, and Materials are highly sensitive to trade tensions and the slowdown in global growth,” Goldman Sachs wrote in a note October 4. “Another driver of Energy revenue weakness is the 18% plunge in oil prices. Real Estate (+5%) and Communication Services (+2%) are expected to deliver the fastest earnings growth in 3Q.”

Other notable earnings reports scheduled for Tuesday include BlackRock (BLK), Omnicom (OMC), Johnson & Johnson (JNJ), and UnitedHealth Group (UNH) before market open; J.B. Hunt Transport Services (JBHT) and United Airlines (UAL) after market close

Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.

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