The first-quarter earnings season will kick off with big US banks, including JPMorgan Chase and Wells Fargo, later today, followed by Bank of America, Citigroup, and Morgan Stanley next week. After a turbulent week on Wall Street, results from these flagship lenders will offer critical insights into the broader economic impact of President Trump’s sweeping tariffs on business sentiment and outlooks.
Analysts expect the banks to deliver solid results for the first three months of the year, supported by a still-resilient US economy during the period. However, attention will likely shift toward forward guidance, with expectations for a more cautious tone amid rising economic uncertainties. Growth outlooks are expected to be revised downwards, a key metric for investors as they assess the longer-term effects of trade disruption.
Before the recent tariff-driven market turmoil, the banking sector had been among the stronger performers, buoyed by steady loan growth, improved liquidity conditions, and a pick-up in merger and acquisition (M&A) activity. By 19 February, shares of both JPMorgan and Wells Fargo had gained roughly 13%. However, sentiment has since reversed, with both stocks plunging more than 20% amid an escalating trade war sparked by Trump’s tariff announcements.
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In the wake of last week’s reciprocal tariff announcement, Morgan Stanley analyst Betsy Grasek downgraded the US banking sector from ‘attractive’ to ‘in line’. “Trade developments move our base case to a significant gross domestic product slowdown, with risk of our bear-case recession scenario rising sharply,” she wrote in a note. Grasek added that investment banking revenues are likely to be more sensitive to recession risks than traditional lending.
Dilin Wu, a research strategist at Pepperstone Australia, also noted that economic uncertainty and rising recession risks stemming from the tariff war could suppress loan demand. Wu said banks may need to “face higher credit loss provisions, which would further dampen financial performance,” adding that “the volatility in financial markets, driven by tariff-related uncertainties, will likely hinder capital market activities, negatively affecting investment banking revenues, particularly in M&A and equity issuance.”
Investor attention will likely centre on the banks’ outlooks and guidance for any signs of longer-term impact from the tariffs. “These harsh realities mean the markets will have to price in the subsequent hit to corporate profits, with the looming US reporting period—unofficially kicked off by a few US banks on Friday—to be watched closely for earnings downgrades and the revision or outright removal of guidance,” Kyle Rodda, a senior market analyst at Capital.com, wrote in an email.
