"Can't go to the moon every quarter": Big banks' bumpy start to earning season

Earnings season is in full swing. Tuesday morning featured reports from JPMorgan Chase, Wells Fargo, Goldman Sachs, and Citigroup. On Wednesday, Bank of America and Morgan Stanley will turn in their reports.

So far, the results have been pretty mixed.

JP Morgan Chase is the largest bank in the U.S., so when it misses expectations — as it did in the third quarter —everyone sits up a little straighter.

“They are a trendsetter, whether we like it or not,” said Christopher Marinac, director of research at Brean Capital.

Chase has a lot of information about businesses and consumers. It makes a lot of money off investment fees and company deals — which were volatile in the third quarter.

“It is certainly just the reality of the business,” Marinac said. “Can’t go to the moon every quarter.”

Marinac said never-ending expectations of growth have soured what has otherwise been a pretty good period for banks. Commercial lending is up because of AI. Consumer credit and debit spending is strong because of steady employment.

“So as long as that continues, there should be — I would say — a pretty good support to GDP,” said Chris McGratty, head of U.S. bank research at Keefe, Bruyette & Woods.

However, the forward guidance part of these earnings reports also hinge on what the Federal Reserve does with interest rates, and how companies and consumers respond, said Stephen Biggar, director of financial institutions research at Argus Research.

“You know, if you’re about to proceed with a project — let’s say as a commercial customer — you might say, ‘Look, a quarter point is not going to impact whether or not I take this loan out,’” Biggar said.

The Federal Reserve increased rates by a quarter-point in September. Markets are expecting another quarter-point increase before the end of the year. Biggar said that added together, a half-point hike can have a real impact on bank lending.

“The old statement about ‘you can’t fight the Fed,’” he said.

In the end, the Fed will do with interest rates what it needs to do.