Earnings season: What to watch for from financials

Earnings season kicks off Friday, October 13 as several banks including JPMorgan Chase & Co. (JPM), Citigroup (C), and PNC Financial Services Group (PNC), will be reporting earnings. Scott Krisiloff, The Transcript Editor and Avondale Asset Management Founder, joins Yahoo Finance Live to discuss what to watch for from the financial sector going into earnings season.

“The types of things that we’ll be looking for in earnings seasons as it starts up,” Krisiloff says, is “we're looking at interest-rate sensitive sectors across the board right now with longer term interest rates rising and trying to see the impact that that... rise of interest rates is having on them,” as well as the mortgage space. Krisiloff adds that he's “not expecting any sort of continued financial crisis from especially these long-duration asset securities portfolios at banks.”

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Video Transcript

AKIKO FUJITA: Well, earnings season is set to kick off this week with JP Morgan, Wells Fargo, and Citigroup set to report third quarter earnings on Friday. There's certainly gonna be a lot of scrutiny surrounding some of the nation's biggest banks as they navigate one of the most challenging periods for their industry.

Will big banks be able to catch a break this quarter? Let's bring in Scott Krisiloff, the transcripts editor and founder of Avondale Asset Management. Scott, good to talk to you today. There's certainly gonna be a lot of focus on loan loss provisions, for example, with some of these big banks, given how we have seen credit tightening. What are you expecting?

SCOTT KRISILOFF: Yeah, I mean, I think we're looking at interest rate-sensitive sectors across the board right now with longer-term interest rates rising and trying to see the impact that that rise in interest rates is having on them. So, you know, the same sorts of dynamics that hit Silicon Valley Bank earlier this year as their longer duration, securities portfolios were impacted by rising rates.

We wanna see how that's impacting other banks across the space as well. Obviously, the mortgage space is going to be heavily impacted by this. Mortgage volumes have fallen already significantly. But those are the types of things that we'll be looking for in earnings season as it starts up.

AKIKO FUJITA: You know, we have seen the water, so to speak, sort of a little calmer at least when it comes to regional banks since we saw the SVB collapse earlier this year. You talked about the interest rate-sensitive spaces. I mean, these regional banks, medium-sized banks certainly gonna be in focus yet again. What's your sense right now in terms of how much more of a shakeup we're likely to see given where rates are and where they're expected to remain?

SCOTT KRISILOFF: Yeah, I mean, I'm not expecting any sort of continued financial crisis from especially these long-duration asset securities portfolios at banks. But we do really want to look at the way that interest rates are impacting, for instance, loan demand at the banks just for a broader sense of how it's impacting the economy.

As rates go higher, obviously, you mentioned mortgages are one place where now that we're above 7%, it makes housing less affordable. But there's a lot of other areas of the economy that are interest rate-sensitive as well, dependent on credit that will make their way into loan demand. It'll be interesting to see how that's impacting bank quarters through that lens.