Analysts to Watch for Signs of Headwinds in Banks’ Earnings Reports

With several banks set to report their third quarter earnings this week, analysts reportedly expect them to show strong growth but will also be looking for signs of headwinds from delinquencies in student and auto loans.

The sector’s growth has been fueled by a surge in mergers and acquisitions, a pickup in capital markets activity and a favorable regulatory environment that has reduced the burdens of fees and examinations, the Wall Street Journal reported Monday (Oct. 13).

At the same time, there are signs of headwinds that could impact future earnings, including rising delinquencies, a slight increase in corporate bankruptcies, and a small slowdown in the growth of consumers spending, according to the report. Lower-income households, in particular, are being pressured by some costs rising faster than wages.

It was reported Sunday (Oct. 12) that the relaxing of financial regulations by the Trump administration could open up nearly $140 billion in capital for Wall Street lenders.

Fernando de la Mora, co-head of financial services at consultancy Alvarez & Marsal, told the Financial Times that the administration’s deregulation will unlock “a huge amount of capacity, which will give a massive economic boost and an earnings uplift.”

On Sept. 30, it was reported that banks are enjoying near-record fees driven by the best year for M&A activity since 2021. M&A deals are on track to grow 35% year over year in 2025 to reach $3.1 trillion.

For investment banks, this boom delivered a “near-record” wave of fees, to the tune of $95.4 billion in the first nine months of the year.

In terms of potential headwinds for the banking sector, it was reported Friday (Oct. 10) that a record-high share of subprime borrowers, more than 6%, are 60 days or more overdue on their car payments. Among other borrowers, the delinquency rate has remained steady.

The subprime borrowers have been pressured by new-car prices that have been high since the pandemic, interest rates that have helped drive up monthly payments, wages that have been stagnant and unemployment that has been rising.

Fitch Ratings said in September that it expects the performance of U.S. auto loan asset-backed securities to deteriorate this year.