How To Trade Bank Earnings Season


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  • Morgan Stanley has cut its Q3 earnings estimates for U.S. banks by about 1.0 percent.
  • The firm believes more earnings cuts will likely come in the next two weeks.
  • Morgan Stanley sees a buying opportunity if earnings cuts pressure share prices.
  • With Q3 earnings season for big U.S. banks set to kick off in mid-October, Morgan Stanley analyst Betsy Graseck sees a potential opportunity for patient traders. In a new report, Graseck explained why the perfect time to buy big bank stocks could be coming soon.

    Downward Revisions Coming

    Morgan Stanley has a bullish outlook for U.S. banks in the longer term, but Graseck believes that traders should remain patient for now.

    In her report, she reduced Morgan Stanley’s Q3 earnings estimates for the sector by about 10 percent. In addition, Graseck noted that she expects other firms to follow with EPS estimate reductions in the weeks leading up to earnings season, which will likely pressure bank stocks.

    Earnings Themes

    With 10-year treasury yields falling 0.32 percent in Q3, Graseck expects that the net interest margins (NIMs) of the banks were once again squeezed in the quarter.

    However, the recent Federal Reserve numbers suggest that loan growth during the quarter came in stronger than expected, which could boost bank bottom lines.

    The wildcard for the quarter remains expense management. A persistent challenging revenue environment has prompted major expense overhauls at most banks. Graseck is looking for Q3 cuts to occupancy, FTE count and third-party spend.

    Top Picks

    The trade Morgan Stanley is waiting for is to buy top picks on earnings revision dips ahead of earnings season. The firm prefers Bank Of America Corp (NYSE: BAC), Citigroup Inc (NYSE: C) and Regions Financial Corp (NYSE: RF) and sees 27 percent upside to the group.

    Disclosure: The author owns shares of Bank of America.Image Credit: Public Domain

    Crypto Whales Are Loading Up — Are You?

    New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.


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    Posted In: Analyst ColorAnalyst RatingsBetsy GraseckMorgan Stanley