When the biggest U.S. banks begin reporting fourth-quarter results on Friday some of the headlines could show profits plunged by as much as 40% from a year earlier, before the pandemic struck.
But investors will be focused on digging out clues to the earnings rebound expected in 2021.
“You can look at Q4 as somewhat of a transition quarter as you put some of the challenges from 2020 in the rear-view mirror and look ahead to an improved 2021,” said Barclays analyst Jason Goldberg.
The pandemic caused interest rates to plunge and produced a record decline in the margin between what lenders charge for loans and what they pay for money, said Goldberg.
The pandemic also pushed big U.S. banks to set aside more than $65 billion for expected loan losses.
From those low points, banks could see profits more than double in first and second quarters of 2021, according to Refinitiv’s IBES estimates.