2020 was a whiplash kind of year for U.S. banks. When the firms start reporting fourth-quarter earnings this week, investors will want to know if they should expect another.
The spring and summer of 2020, when the coronavirus pandemic first started to ravage the U.S. economy, looked bad for banks. Profits plunged as they set aside money for bad loans. So did their stock prices. But by the fall, things had improved. Strong mortgage demand, healthy trading revenue and an economy kept afloat by generous government stimulus helped insulate the banks from a worst-case scenario.
What isn’t clear now is how long those boosters can last.
“The fourth quarter is going to be messy,” KBW analyst Brian Klock said. “But the real focus is going to be what 2021 is going to look like.”