Banks are thermometers for the economy. Here are 3 things to watch when they report earnings.

Core Insights - Major banks in the U.S. are set to report their earnings for Q3, with JPMorgan Chase, Wells Fargo, and Citi leading the announcements [1] - The government shutdown has limited economic data availability, making these earnings calls crucial for understanding the health of consumers and businesses [2] Group 1: Credit Quality - Credit quality is a key indicator of whether customers are fulfilling their loan obligations or facing payment difficulties due to financial constraints [3] - There is a divide on Wall Street regarding credit quality predictions, with some analysts expecting deterioration while others foresee continued strength [4] - Last quarter, banks indicated that the economy appeared stable, with JPMorgan's CFO noting that consumers seemed to be doing well [5] Group 2: Loan Growth - Bank loan growth reflects consumer and business confidence in future earnings, influencing borrowing for homes and business expansions [6] - Analysts suggest that new loan demand may have softened in Q3, potentially due to increased competition from non-bank lenders [11][12] - A significant portion of loan growth (60% year-over-year) is attributed to loans made to non-depository financial institutions, including private equity and credit firms [13] Group 3: AI Investment - The AI sector is becoming a major economic driver, with banks like JPMorgan Chase and Goldman Sachs providing substantial financing to AI firms [14] - Investors are keen to understand how much of the banking industry's business will be linked to the AI sector, which presents both potential and risks [15] - There is a belief that aggressive investment in AI is necessary for banks to remain competitive, despite the uncertainty of returns on some projects [16]