During the bitter January months, traders on both sides of the pond have become acclimatised to the frantic beginning of earnings season. And in the midst of the deluge of results, one sector that is watched closer than any other are the Banks.

Its our stateside cousins that take the lead, with major names having released their results over the past seven days. So what can their figures tell us about the state of American institutions, and will there be some read across for British names?

Kicking off the season, JP Morgan released their numbers on 12th January. The bank, which has swelled to become the largest on the planet in recent years, revealed a striking figure that would soon become a trend amongst peers.

A $2.4bn writedown, resulting from the impact of President Trump’s tax reform bill, would be the first of many. However, the company managed to beat analysts’ consensus for both adjusted earnings ($1.76 vs. $1.69 expected when not accounting for the tax writedown) and revenues ($25.45bn vs. $25.15bn est), whilst alongside the colossal accounting figure was a positive look to the future; the company now expects its fiscal 2018 effective tax rate to be around 19 percent from 35%.

Wells Fargo put its numbers across the wires just hours later, revealing that whilst both earnings ($1.16 vs $1.23 est) and revenue ($22.1bn vs $22.45bn est) missed, earnings had already received a $3.4bn boost from the Republican tax reform bill.

On the following Tuesday, Citigroup reported the largest writedown of all, a monstrous $22bn due to $3bn of repatriation costs alongside the headline $19 billion charge. It too beat earnings expectations ($1.28 vs. $1.19 est) and revenues ($17.3bn vs $17.25bn est), and expected the long-term impact of tax reform to be positive.

And today, Bank of America Merrill Lynch reported adjusted earnings beat expectations ($0.47 vs. $0.44 est) despite revenues being a little light ($20.69bn vs. $21.30bn est), although it noted a $2.9 billion tax hit while rival and global behemoth Goldman Sachs smashed its earnings expectations (5.68 vs $4.91 est) and posted a healthy revenue beat ($7.83bn vs $7.61bn est). The latter’s results, however, will be noted for a sharp 50% YoY decline in revenues at its key fixed income, commodities and currencies trading business, alongside a $4.4 billion tax hit.

With just Morgan Stanley left to report (tomorrow; midday), will it be the same for the UK Banks when they begin reporting in February?

While both Lloyds (Weds 21 Feb) and the Royal Bank of Scotland (Fri 23 Feb) have a minimal presence in the world’s number on economy, Barclays (Thurs 22 Feb), HSBC (Tues 20 Feb) and Standard Chartered (Tues 27 Feb) are all likely to announce some impact of US tax reforms, with Barclays also the most likely to be affected by dampening trading revenues at global investment banks.

For the former two names, however, are more likely to be influenced by the domestic UK market, and could see some positive margin readacross from last year’s first Bank of England rate hike in a decade.

Exactly how much benefit, if any, stems from the BoE – especially on the all-important net interest margin (NIM) measure – will be of key importance for the UK banks, alongside the impact of US reforms for the internationally exposed contingent.

Henry Croft, Research Analyst, 17 January 2017