U.S. Banks Face Uncertainty, Yet Earnings Momentum Could Persist

Analysts at HSBC warn that U.S. banks are grappling with broader economic uncertainty driven by aggressive tariff policies and softening consumer and business confidence. Despite these challenges, banks are expected to show improved earnings momentum if the economy avoids a major downturn.

Key Points

• Economic Headwinds:
  Heightened tariff concerns and mixed economic data—such as weaker-than-expected consumer spending and a surge in underlying price metrics—are creating uncertainty. These factors have forced banks to reassess growth expectations, with HSBC lowering its earnings forecasts for 2025 and 2026 by 2% to 5%.

• Tariff Impact:
  President Trump's plans for more aggressive reciprocal tariffs have raised input costs and dampened investment banking fees. HSBC now estimates a U.S. tariff rate of 15% in 2025, which is expected to boost inflation and slow economic growth.

• Earnings Resilience:
  While bank shares have slipped, the improved earnings momentum is expected to hold if economic conditions remain stable and borrowing costs stay low. This momentum is key to offsetting headwinds from lower net interest income.

• Stock-Specific Views:
  In individual stocks, HSBC has upgraded PNC Financial Services to a "buy" after its share price fell 19% from late November highs. Conversely, the outlook remains cautious on larger Wall Street names like Morgan Stanley and Goldman Sachs, leading to lower price targets.

For those seeking a closer look at the financial performance of U.S. banks in this shifting environment, detailed data on profitability and efficiency can be found via the Key Metrics (TTM) endpoint.