The first quarter of the 2023 earnings season has started with U.S. banks reporting results. Analysts estimate operating earnings per share (EPS) at $49.54 ($39.73 ex-financials), showing a year-over-year growth of 0.4% and a quarter-over-quarter decline of 1.6%.
However, these estimates suggest a change in sector-level leadership, with the energy sector’s boost fading due to normalizing commodity prices. While loan loss provisions are moderating, slowing loan growth, moderating net interest margins, and weak M&A activity remain headwinds for financials. The growth sectors are facing challenges too, as falling hardware demand and less discretionary spending should weigh on information technology and communication services.
Despite current resilience, the outlook is not entirely positive, as the U.S. economy seems to be edging closer to a recession, and current earnings estimates are likely to be revised downwards, increasing volatility.
