(Bloomberg) -- Major US investment banks kicked off earnings season with mixed results and downbeat commentary on the economic outlook, even as they benefit from the Fed’s rate hikes and posted higher net interest income. Provisions for credit losses at JPMorgan and Wells Fargo came in higher than expected, reflecting the banks’ increasing uncertainty toward borrowers’ ability to repay debt. Bloomberg Intelligence said the S&P 500 financial sector is likely to post the biggest EPS contraction in the benchmark this quarter, compared to a 2.5% gain for the broader index. 

Next week, investors can expect to hear from more lenders about consumer spending trends and credit risks after another red hot monthly inflation reading indicated that the Fed is likely to continue aggressive rate hikes, raising the risk of triggering a serious economic downturn.

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Earnings highlights to look for next week:

Monday: Bank of America (BAC US) is due premarket. Consensus estimates point to a 46% sequential growth in its provisions for credit losses, the fastest estimated rate of any major US bank this quarter, as it gears up for more economic uncertainty. Despite increasing caution, the bank’s credit quality and leading indicators “remain strong”, according to analysts at Baird, with delinquencies and charge-offs below pre-pandemic lows. Consensus estimates show total revenue climbing by about 3%, as rising net interest income more than offsets falling investment banking fees, said Baird. The bank is expected to recognize the a $354 million pretax charge related to the Ambac settlement in the quarter, as well as the $225 million penalty levied by regulators due to its failure, along with 11 other financial firms, to monitor employees’ communications on unauthorized messaging apps.

• More than 25 regional banks, including Truist Financial Corp (TFC US), SVB Financial Group (SIVB US) and Huntington Banchshares Inc. (HBAN US), will deliver results next week. On average, sequential expansion of net interest margin may have peaked in the quarter, according to analysts at Raymond James, as the group continues to benefit from the Fed’s rate hikes, though interest paid out on deposits is quickening as well. Loan growth should continue in the period, especially for banks with strong commercial loan businesses such as Comerica (CMA US), as corporations tap banks for funds for working capital and capital expenditures. Also of interest will be credit quality, as banks have so far avoided significantly increasing provisions for bad loans: consensus estimates are suggesting an average 59% sequential increase in credit reserves at the top 10 regional operators due next week, according to data compiled by Bloomberg.

Tuesday: Goldman Sachs (GS US) is set to report its 3Q results before the bell. Despite consensus estimates calling for net interest income to grow by 31% from a year ago, Goldman’s total revenue is expected to decline for the third consecutive quarter, thanks to falling investment banking fees and headwinds in the wealth management business, according to analysts at Jefferies. As revenue falters, investors may turn their attention to updates on Goldman’s strategic growth initiatives, such as its Apple Card partnership, and expense outlook, according to BMO Capital Markets analysts. Analysts expect total non-interest expenses to increase for the first time in 2022, rising about 10% from last year. Despite citing “broad economic concerns” last quarter, Goldman is also expected to sequentially decrease its provisions for credit losses by about 12%, to around $590 million, the second lowest estimated value of the six largest US banks, based on Bloomberg data.

• Netflix (NFLX US) is set to return to adding paid subscribers in the third-quarter, after two straight quarters of declines, with analysts pointing to growth in Asia and Latin America as helping the streaming company achieve its own target of 1 million net subscription adds in the period. Investors will be on the lookout for more color on how a lower-priced, ad-supported subscription tier launching next month will impact earnings as the company diversifies its revenue streams. Netflix’s top-line may face “meaningful” currency headwinds again this quarter, according to analysts at Truist Securities, with consensus calling for about 5% growth from a year ago, the slowest pace on record.

Wednesday: Tesla (TSLA US) will report postmarket, following disappointing third-quarter delivery volumes that fell short of analyst expectations and sent the stock lower by 9% the next day. While analysts at the time attributed the miss to logistic snarls rather than a decline in demand, consumer desire to buy its cars will remain a focal point for the coming months. There is a risk that it could miss its own target for a 50% annual growth rate given that deliveries in the first nine months increased just 45%. Its market share in the US electric vehicle market may come under threat as legacy manufacturers ramp up battery-only car production, while demand for propulsion technology could wane once early adopters are satisfied, Bloomberg Intelligence said.

• Stockholm-listed Volvo and Shenzhen-listed CATL are also scheduled to release results in what might be a volatile week for electric vehicle makers and battery suppliers globally. For more on the environmental, social and governance themes that may arise on next week’s earnings calls, see the new ESG Stock Watch.

Thursday: Snap (SNAP US) will be first of the big tech companies to offer a glimpse into the extent of digital ad weakness when it reports 3Q results after the close. Analysts are expecting revenue to grow just 5.7% year-over-year -- the slowest pace since it went public -- along with a third straight quarter of EPS losses. That said, Bloomberg Intelligence expects the company to meet revenue consensus as it has managed to maintain its share of time spent and number of daily active users, thanks to its high engagement with Gen Z and millennial core users. Investors will be paying attention to just how much the launch of its Snapchat+ subscription in the quarter and recent cost-cutting plans will be able to offset weak ad pricing and changes to Apple’s identifier for advertisers.

Friday: American Express (AXP US) is due before market open. Growth in its billed business, which analysts expect to have slowed in the third-quarter, will be a focal point after Citi downgraded the stock to sell, warning that the possible deceleration in spending volume is not yet fully considered by investors. Early stage delinquencies will also watched by investors as an indicator of credit outlook, and Bloomberg Intelligence expects loan growth to likely remain healthy as AmEx consumers would be the last to use cards to bridge income gaps. Consensus is accounting for $5.1 billion in provisions through 2023 -- down slightly from the second quarter -- suggesting recession fears may have peaked, BI said.

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