U.S. banks are facing body blows from Ukraine war and a slump in investment banking activity

Earning expectations for the big banks have been dialed back through the first quarter amid Russia sanctions and a steep decline in deal activity

By Steve Gelsi | 7 April 2022

MARKET WATCH — Big U.S. banks are expected to reveal the impact of the Ukraine war and a drop in investment banking activity related to moribund capital markets when they provide first-quarter profit updates next week.

Hit by the slowest quarter for initial public offerings since 2016, efforts to curb business with Russia and jitters about an economic slowdown tied to inflation, the financial powerhouses faced headwinds in the three months ended March 31.

JPMorgan Chase & Co. JPM, -0.50% booked about $1.8 billion in global investment banking revenue, down from about $3 billion in the year-ago period, according to estimates from Dealogic (See Chart). Goldman Sachs Group Inc. GS, +0.41% drew in about $1.6 billion in investment banking revenue, down from $2.9 billion in 2021.

Analysts have been reducing their earnings expectations for JPMorgan and Goldman, as well as Bank of America Corp. BAC, -0.30%, Morgan Stanley MS, +0.45%, Citigroup Inc. C, -0.95% and Wells Fargo & Co. WFC, -0.19%.

While the current inverted yield curve between two-year and 10-year Treasurys signal a potential recession, the pricing dynamic is not expected to impact first-quarter results from banks. […]

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