US Banks 3Q22 Preview: Forest in Focus, Not Trees

Jesse Rosenthal - Head of US Financials / Senior Analyst - Banks and Specialty Finance
Peter Simon, CFA - Senior Analyst - North American Banks and Brokers

EXECUTIVE SUMMARY
  • U.S. Banks report 3Q22 earnings beginning Friday; we preview expectations and key themes we’re watching for from results and management commentary.
  • Expect banks to report fairly healthy 3Q22 earnings, but with investors looking past headline results with an eye on impending recession risk; credit quality and market conditions should dominate the conversation.
  • Capital markets results will once again be weighed by the dreary issuance environment, leading to another quarter of substantial YoY declines across investment banking lines.
  • Loan growth is likely to be broad-based, with solid QoQ increases in both commercial and consumer, though not at the blistering pace of 2Q. Behind headline numbers, we will be looking for management color on how demand is holding up in the face of sustained inflationary and rate pressures, and where pockets of weakness could be emerging.
RELATIVE VALUE

Bank supply continues to be in focus for investors amid what could end up being a third consecutive record year for issuance out of the Big 6. And as ever, the market is trying to size up potential post-reporting market taps as the banks almost always issue following earnings: since 2010, there have only been three quarters where banks haven’t issued following results, though two of them were in 3Q (2011 and 2018). 

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