Yahoo Finance's Alexandra Semenova breaks down what to watch from big banks as they're set to release earnings this week.

Video Transcript

AKIKO FUJITA: We are on the cusp of yet another earnings season, and markets are turning to JP Morgan, Citi, Wells Fargo, and Morgan Stanley, as they report during the most uncertain of economic environments. For a preview of what to expect, let's bring in Yahoo Finance's Alexandra Semenova. These are always-- it's always a good bellwether, right, about where things are in terms of the economy. As we said, never been more uncertain.

ALEXANDRA SEMENOVA: Yeah, absolutely, Akiko. Those four banks, among the six largest in the US by assets, are set to be the opening act of the earnings season, with Goldman Sachs and Bank of America set to release results next week. And some of the themes that we'll be watching closely are a slowdown in investment banking revenues, potential layoffs across their businesses, how demand for loans is holding up with higher interest rates, and any potential warnings about the economy that CEOs may deliver on earnings calls.

And this quarter, profits are expected to shrink, especially compared to a really robust 2021 for Wall Street. Profits are also likely to take a hit from higher loan loss provisions. Those are funds set aside by banks for any potential sour loans if customers don't make their payments. The six largest US banks are estimated to set aside a collective $4.5 billion this quarter. That's according to a Financial Times report today. And this is also a turnaround from a year ago, when banks actually benefited from releasing those reserves, as we were recovering from the pandemic.

One notable thing to note, too, is that banks typically benefit from higher interest rate environments. Those often give them a nice boost on their net interest income. But investment banking revenue is likely to offset that. And some other things to look out for, too, are any comments that bank executives make. Jamie Dimon is always an interesting one on his earnings calls with his storm cloud warnings. Credit Suisse and the broader-- what that means for the broader industry. And also Bank of America and Morgan Stanley are estimated to lose a combined $500 million on Elon Musk's Twitter deal.

AKIKO FUJITA: Yeah, worth noting the bar pretty low, going into earnings season, not just within banks, but overall. Thanks so much for that. I know you're going to tracking those results really closely.