What could we expect for ASX 200 bank shares this earnings season?

We are quickly barrelling towards yet another ASX earnings season in February. The landslide of reports will give investors a peek into how prepared Aussie companies are for possible economic weakness. An area that will no doubt attract plenty of interest is the bank shares of the S&P/ASX 200 Index (ASX: XJO).

The big four banks embraced multiple interest rate rises throughout the second half of 2022. Swiftly increasing rates on loans while gradually upping rates on deposits have helped the banks secure bigger net interest margins. In turn, ASX bank shares are in a far better position than six months ago:

• Commonwealth Bank of Australia (ASX: CBA) up 13.1%
• Westpac Banking Corp (ASX: WBC) up 16.7%
• National Australia Bank Ltd (ASX: NAB) up 7.1%
• ANZ Group Holdings Ltd (ASX: ANZ) up 13.4%

But, could the music be about to stop for these banking beasts?

Fortunately, the biggest of the US bank shares released their latest quarterly results last week. This gives us the chance to get a sense of what might be ahead of us and our local counterparts.

Easy money comes and goes

The biggest of the big spilled the beans last week, with JPMorgan Chase & Co (NYSE: JPM), Bank of America Corp (NYSE: BAC), Citigroup Inc (NYSE: C), and Wells Fargo & Co (NYSE: WFC) providing their latest numbers.

Below is a brief snapshot of how the bank’s fourth-quarter numbers panned out.

There are three key takeaways from the above summary in my view…

Firstly, revenue growth was fairly solid — aside from Wells Fargo — with all the major banks reporting a benefit from increased net interest income. We’ll likely see a similar trend from ASX 200 bank shares this reporting season following the RBA’s actions.

Secondly, Aussie banks with more exposure to markets and investment banking could come under pressure. In terms of equity investments, it will depend on what the banks are invested in. However, the more ‘risk-on’, the more detrimental it might be. Wells Fargo took a $1 billion impairment charge mostly tied to venture capital.

Furthermore, investment banks such as Morgan Stanley (NYSE: MS) and Goldman Sachs Group Inc (NYSE: GS) suffered brutal profit falls. The lack of market activity in the subdued environment largely contributed to the lacklustre results. This is an area that our own Macquarie Group Ltd (ASX: MQG) is exposed to — making it one to keep an eye on.

The final takeaway is the unnerving increases in credit loss provisions across the board. We could see similar this season if ASX 200 banks are likewise anticipating a weaker outlook.

When do ASX bank shares report?

At this stage, we know that Macquarie will possibly be one of the first with its third quarter trading update on 7 February. From there, CBA and NAB will follow up back-to-back on 15 and 16 February.

In addition, we might see trading updates from Westpac and ANZ sometime in February. However, neither has provided a specific date yet on their financial calendars.

The post What could we expect for ASX 200 bank shares this earnings season? appeared first on The Motley Fool Australia.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Mitchell Lawler has positions in Commonwealth Bank Of Australia and Macquarie Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bank of America, Goldman Sachs Group, and JPMorgan Chase. The Motley Fool Australia has recommended Macquarie Group and Westpac Banking. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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