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What Bank Earnings Can Tell Us About U.S. Economic Growth

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MARTIN BACCARDAX: The bank earnings will give us absolutely the clearest visibility with respect to U.S. economic growth from any of the companies that we're likely to hear from over this quarterly earnings season. The banks have the finger on the pulse of three major drivers of U.S. economic growth. The mortgage market, the corporate and sort of individual loan market, as well as what they see with regards to financial market activity. Now, we are going to see a big decline in net income. There's no question about that. Deal making has fallen off a cliff compared to 2021 levels, and trading activity isn't nearly as robust as it has been over the previous years. And ultimately, those numbers aren't going to be a terrible surprise. But what we are looking for is what the banks have to say about their credit provisions.

In other words, how much money are they prepared to set aside in order to absorb potential losses, either in their credit card divisions, in their mortgage loan books or any of the other lending components they have across the whole of their businesses. The top six banks are estimated to probably set aside around $5.7 billion. That would be a 50% increase from the same time last year and would be indicative of what these banks see in terms of potential economic weakness. But then again, we want to know what they have to say about their growth prospects, where they see loan growth headed into the coming months before we can really get that clearest picture. But the bank 

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