High stakes ahead of US banks’ earnings season
A fired–up US banking sector heads into next week’s results season up sharply since April’s post-tariff lows. Which stocks have the most at stake?
10th July 2025 15:00
by Graeme Evans from interactive investor
A 39% bounce for US banking valuations from April’s lows has left the likes of JPMorgan Chase & Co (NYSE:JPM) and The Goldman Sachs Group (NYSE:GS) with lofty expectations to meet in results due next week.
Deutsche Bank’s analysis of the stocks with the highest and lowest bars heading into the second quarter earnings season points to less pressure on Bank of America (NYSE:BAC), having lagged behind its mega-cap peers so far this year.
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Looking across the industry, the bank’s preview note highlights several reasons to view the sector as well positioned versus the broader market.
Factors include an easing in capital requirements and more helpful regulatory backdrop, as well as positive fundamentals such as an expected pick up in investment banking activity.
Deutsche Bank said valuations remain attractive, with large regionals trading at 10.7 times forecast 2026 earnings and mega-caps at 13.6 times. This compares with the S&P 500 index at 20.5 times.
The industry’s earnings season kicks off on Tuesday (15 July) when Citigroup (NYSE:C), JPMorganChase and Wells Fargo (NYSE:WFC) report before Wall Street’s opening bell. Bank of America, Goldman Sachs and Morgan Stanley (NYSE:MS) follow on Wednesday (16 July).
A quarter that began with heavy selling in the wake of President Trump’s Liberation Day tariffs announcement has ended with the S&P 500 index back above 6,000 and in record territory.
The US economy bellwether JPMorgan has lagged behind its mega bank peers since those April’s lows, although it has outperformed across the year following growth of about 23% at the time of the preview note.
It trades at 16 times 2025’s Wall Street earnings consensus, which compares with 15.2 times for peers before widening on a 2026 horizon. The shares tend to trade at a premium given JPM's combination of higher growth/returns and less downside risk during a downturn.
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Deutsche Bank thinks earnings for this year will be broadly flat due to net interest income headwinds from lower rates and less benefit from fixed rate asset repricing than some peers.
It rates the bank with a Hold recommendation, believing that a lot of good news is already priced in.
Goldman Sachs has comfortably outperformed its mega bank peers since the market lows in April, rising 57% in the period up until the start of this week.
Deutsche Bank noted: “Trends in investment banking have improved lately and there is an expectation that Goldman Sachs should likely benefit from that and the broader recovery in equity markets.
“Goldman was also a big winner in the Federal Reserve’s annual stress test from a fortnight ago.”
Bank of America is seen as having a low bar heading into the results, even though shares have performed better of late. They were recently up 11% year-to-date, versus 21% for large cap peers.
The note said some of this under performance was due to lingering concerns that Berkshire Hathaway (NYSE:BRK.B) will continue selling its stake, as well as concerns surrounding 2025 costs, second quarter net interest income and investment banking guidance.
Stocks in the medium bar bracket include Citigroup, despite optimism that share buybacks will accelerate in the second half of 2025 from the second quarter pace of $2 billion.
The shares have outperformed mega bank peers since the market lows in April but continue to trade at a significant discount, according to Deutsche Bank.
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