Despite strong Q3 earnings, US bank shares are falling as investors doubt future growth. JPMorgan reported a 6 per cent earnings increase, while Goldman Sachs and Citigroup saw profits rise 29 per cent and 17 per cent, respectively, driven by strong equity trading. However, market valuations suggest investors believe this is as good as it gets.
A simplified valuation model shows JPMorgan’s market cap is close to what it would be worth if earnings never grew again. Fears that AI-powered personal finance agents and fintechs could disrupt deposit retention and core banking services are weighing on sentiment. Yet, banks have advantages: customer trust and regulatory oversight.
If earnings grew at just 2 per cent annually, banks would be worth a third more. While AI spending is rising—JPMorgan spends $700mn yearly—the long-term growth potential of Wall Street remains intact.
Source: Financial Times Companies · Summarized by HeadlinesBriefing