{"id":36052,"date":"2023-07-15T10:20:20","date_gmt":"2023-07-15T14:20:20","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/jpmorgan-citi-and-wells-earnings-to-unleash-borrowing-blitz-by-banks\/"},"modified":"2023-07-15T10:20:22","modified_gmt":"2023-07-15T14:20:22","slug":"jpmorgan-citi-and-wells-earnings-to-unleash-borrowing-blitz-by-banks","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=36052","title":{"rendered":"JPMorgan, Citi and Wells earnings to unleash borrowing blitz by banks"},"content":{"rendered":"
\n

Big U.S. banks kick off second-quarter earnings on Friday, with investors bracing for a subsequent wave of borrowing in the bond market from America\u2019s top lenders.<\/p>\n

JPMorgan Chase & Co.
\n JPM,
\n +0.60%<\/bg-quote>,<\/span>
\n Citigroup Inc.
\n C,
\n -4.05%<\/bg-quote>
\n and Wells Fargo & Co.
\n WFC,
\n -0.34%<\/bg-quote>
\n all are due to report financial results for the quarter Friday, with focus on the continued impact of higher interest rates on bank assets and the broader health of the banking sector after Silicon Valley Bank\u2019s collapse in March.<\/p>\n

\n

After Friday\u2019s earnings announcements, Bank of America Corp.
\n BAC,
\n -1.89%<\/bg-quote>,<\/span>
\n Morgan Stanley
\n MS,
\n -0.50%<\/bg-quote>
\n and Goldman Sachs Group
\n GS,
\n -0.76%<\/bg-quote>
\n follow with results next week.<\/p>\n

Bond issuance from the six biggest banks after earnings is expected to reach $28 billion to $32 billion, according to a Bloomberg analysis of JPMorgan data.<\/p>\n

\u201cIt\u2019s in that ballpark,\u201d Tom Murphy, head of investment-grade credit at Columbia Threadneedle, adding that a raft of proposed changes to U.S. and international bank capital requirements could feed into how much fresh debt is issued.<\/p>\n

\u201cThere are a lot of moving parts from the perspective of banks\u2019 capital needs,\u201d Murphy said. \u201cMy short answer is there is probably going to be more issuance.\u201d <\/p>\n

See:<\/strong> Fed\u2019s Michael Barr proposes new capital requirements for banks with $100 billion or more in assets<\/p>\n

Optimism about interest rates<\/h2>\n

Last summer, only four of the six big U.S. banks borrowed in the bond market after reporting second-quarter earnings, according to Informa Global Markets. The tally reached $27.5 billion, with Goldman and Citigroup refraining from issuing bonds in that period.<\/p>\n

For this year, the same six banks raised $35.75 billion, down from $88 billion for the same stretch of last year, according to Informa.<\/p>\n

There\u2019s also has been a pullback in overall issuance from the financial sector, which Murphy pegged at about 30% of total issuance in 2023, down from over 40% last year.<\/p>\n

Higher borrowing costs play a role, with rates for major companies increasing as the Fed\u2019s policy rate climbed about 500 basis points above the pandemic lows. However, debt issuers also tend to seek out favorable pockets in capital markets to issue fresh bonds.<\/p>\n

Recent optimism about the U.S. economy as the Fed\u2019s inflation fight has the stock market trading only about 7% below record highs. The S&P 500 index
\n SPX,
\n -0.10%<\/bg-quote>
\n closed above 4,500 for the first time in 15 months on Thursday. It last hit a record high near 4,800.<\/p>\n

While short-term bond yields have tracked Federal Reserve\u2019s interest rate hikes higher, the benchmark 10-year Treasury yield
\n TMUBMUSD10Y,
\n 3.832%<\/bg-quote>
\n has edged down to about 3.77% as of Thursday from a recent high above 4%, helping bring borrowing costs by major corporations down near levels seen at the start of the year.<\/p>\n

Big banks, huge deposits<\/h2>\n

Big U.S. banks also have so far avoided much of the difficulties hitting smaller lenders holding low-coupon loans and securities that have tumbled in value since the Fed started hiking rates last year. <\/p>\n

Deposits at banks were about $1 trillion lower in June from a $17 trillion peak in the first quarter of 2022, according to a JPMorgan midyear outlook. Regional and small banks had about a $5.2 trillion share of the total deposit base, which was roughly 4% below levels at the end of 2022, but with \u201csome stabilization in the cohort\u201d seen in the first quarter.<\/p>\n

\u201cIt really hasn\u2019t been detrimental to these six large lending institutions,\u201d Murphy said. His team also thinks big banks are better able to withstand any recession that might still unfold, and they like current yields on offer, \u201cwhich are as good as in the fall of 2009.\u201d <\/p>\n

The yield on the ICE BofA US Corporate Index was pegged at 5.52%, versus 5.47% on Jan. 3.<\/p>\n

Also boosting issuance forecasts has been plans for many big banks to increase dividends after the Federal Reserve\u2019s stress tests in late June indicated they looked capable of withstanding a severe shock to the financial system and economy.<\/p>\n

Read: <\/strong>JPMorgan, Goldman, Citi and Morgan Stanley boost dividends after Fed stress tests<\/p>\n

\u2013Vivien Lou Chen contributed reporting to this article<\/em><\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Big U.S. banks kick off second-quarter earnings on Friday, with investors bracing for a subsequent wave of borrowing in the bond market from America\u2019s top lenders. JPMorgan Chase & Co. JPM, +0.60%, Citigroup Inc. C, -4.05% and Wells Fargo & Co. WFC, -0.34% all are due to report financial results for the quarter Friday, with […]<\/p>\n","protected":false},"author":1,"featured_media":36053,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-36052","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nJPMorgan, Citi and Wells earnings to unleash borrowing blitz by banks | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Big U.S. banks kick off second-quarter earnings on Friday, with investors bracing for a subsequent wave of borrowing in the bond market from America\u2019s top\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ifintechworld.com\/?p=36052\" \/>\n<meta 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