Tax hits, deposit wars, paydown blues: A 4Q preview
The next bank earnings season (Didn’t we just finish the last one?) will kick off on Jan. 12, when Wells Fargo and JPMorgan Chase are set to report fourth-quarter results.
Fourth-quarter reports can be noisy as companies throw in special items and charges to close the books on the year, and by mid-January, once the calendar has turned over, those reports often seem anticlimactic. However, they sum up the previous 12 months, and, more importantly, often provide chief executives with a platform to share their forecasts for the new year during conference calls with analysts.
At a Goldman Sachs financial services conference this week in New York, top executives of the big banks gave a peek at what’s on their mind and what’s in store for the current quarter and in 2018. If anything, it seems like 2018 will be a lot like 2017 — but on steroids.
Credit cards and other consumer lending will stay hot, competition for deposits on the retail side will be fierce, commercial lending could remain rocky if and until it improves, and the short-term and long-term impacts of tax reform and other policy reforms will be debated for months.
Tax reform could prompt some one-time bites — ouch to the possible $20 billion at Citigroup — and its impact on loan growth in 2018 will be mild or muted, depending on whom you ask. Interest rates rates are expected to rise, but so, too, might deposit costs as consumer lenders fund growth and VIP customers (businesses and wealthy clients) shop more aggressively for optimal rates. Trading revenue and loan paydowns will be wild cards.
Looks like a fun year lies ahead.