They're singing the same song on Wall Street that they are in Flushing, Queens: "Just wait 'til next year!"
While beleaguered fans of the New York Mets are starting off the season hankering for another trip to the postseason, bankers are just hoping one day the Federal Reserve will follow through on predictions that it will raise interest rates, and provide a badly needed boost to Wall Street banks' net interest margins.
The largest Wall Street banks are all facing lower earnings projections for the first quarter of 2016 than what they reported the prior year. For consumer banks, Wells Fargo's consensus estimates are for 99 cents a share; average estimates for Bank of America expect 25 cents a share in earnings; and Citigroup estimates predict the bank will report earnings of $1.14 a share. JPMorgan Chase consensus estimates are for earnings of $1.27 a share.
U.S. consumer banks had begun the year following economists' expectations that the Fed would continue on the path it began last year, of raising interest rates. Higher interest rates translate into higher net interest income for top banks, which host hundreds of billions in consumer and client deposits. But as a pall was cast over the market to begin 2016, the Fed had to retreat from its expected rate hikes, and that in turn will cost consumer banks.
"Net interest margins will be very much in focus," for earnings this quarter, said Deutsche Bank large-cap banks analyst Matt O'Connor.