The focus for banks this earnings season is what deposit levels are like. Many major banks offering low-interest rate levels on deposits, despite higher-yielding bonds (US 10-year bond are offering a 3.40% yield at the moment), depositors are moving their accounts in search of better returns.
The danger for US banks is that they could face a liquidity crunch if too many investors seek to withdraw too much cash at the same time. So, there are risks this earnings seasons that banks see further selling as investors digest their earnings. On Tuesday April 18 the Bank of America and the Bank of New York Mellon announce their earnings with Morgan Stanley announcing earnings on Wednesday April 19.
Seasonally all threes banks are entering a slower time of year as shown by their seasonals. So, could we see some downside if there are worrying signs about deposit levels over their earnings?
Major Trade Risks:
The major trade risk here is that the earnings continue to surprise to the upside and deposit levels stay stable.
Remember, don’t just trade it, but Seasonax it!