Major bank stocks took a hit in Tuesday’s trading session after Federal Reserve Vice Chair for Supervision Michael Barr announced updated capital requirement regulations.
KBW managing director David Konrad joins Asking for a Trend to discuss the state of the sector and break down the Fed’s latest move.
JPMorgan Chase & Co. (JPM) President and COO Daniel Pinto believes that analysts may have too rosy of expectations for the bank’s net interest income expenses in 2025.
As the Federal Reserve moves into an interest rate easing cycle, Konrad expects “asset-sensitive” names like JPMorgan to experience some pressure in its net interest income.
Related Videos 24:49 02:29 05:32 18:27 Meanwhile, Goldman Sachs (GS) announced that trading revenue could fall 10% in the third quarter, which Konrad calls “disappointing.”
He notes that trading will be a more volatile number as it faces seasonality and volume issues.
He adds, “We think that’s that’s a little bit not necessarily a trend line, but a tough quarter there.”
With the Fed unveiling new proposed capital requirements, Konrad argues that “reducing the capital requirements by 50% was kind of in the market a little bit.
So what ended up happening is you had the US banks holding a lot more capital than the global banks.
For more expert insight and the latest market action, click here to watch this full episode of Asking for a Trend.
Following the announcement of updated capital requirement regulations by Federal Reserve Vice Chair for Supervision Michael Barr, major bank stocks saw a decline during Tuesday’s trading session. David Konrad, managing director of KBW, stops by Asking for a Trend to analyze the Fed’s most recent action and talk about the status of the industry.
Chase & JPMorgan Inc. President and COO of JPM, Daniel Pinto, thinks analysts may have high hopes for the bank’s 2025 net interest income expenses. Though his estimate is lower than Wall Street’s own guidance, Konrad continues, “What happened last year was that they kept raising their guidance because they’re asset sensitive, the forward curve didn’t materialize, and the Fed really didn’t cut rates this year.”. Thus, they exceeded expectations with their estimates this year. ****.
“Asset-sensitive” names such as JPMorgan are expected to face pressure on their net interest income when the Federal Reserve enters an interest rate-easing cycle.
Connected Videos.
24:49.
03:29.
5:32.
18.27.
Konrad describes as “disappointing” Goldman Sachs’ (GS) announcement that trading revenue may decline by ten percent in the third quarter. He says that because of problems with volume and seasonality, trading will be more erratic. “We think that’s a little bit not necessarily a trend line, but a tough quarter there,” he continues. ****.
According to Konrad, the Fed’s announcement of new proposed capital requirements has caused a slight agitation in the market. And that’s really the main point of origin. ****.
Konrad says that the Fed’s prediction of a 9 percent increase in capital “feels about right” and is “largely in-line” with expectations. The Fed usually “gold plates” international standards, but this proposal goes one step further. As a result, the US banks ultimately possessed significantly more capital than the international banks. So this, in my opinion, pretty much fixes that. “.
Click here to watch the entire Asking for a Trend episode for more professional analysis and the most recent market movement.
Melanie Riehl authored this post.
