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A JPMorgan Chase bank in Times Square in New York on February 16, 2017.

A JPMorgan Chase bank in Times Square in New York on February 16, 2017. (Richard B. Levine/Sipa USA/TNS)

Few long-term investors want to relive the last three months of 2018, but they will in the week ahead.

Quarterly earnings season begins in earnest with more than a half-dozen big banks, like Wells Fargo, Bank of America and JPMorgan Chase, scheduled to released their latest financial results. The stock market was abysmal at the end of the year, but not necessarily the business of banking.

As an industry, banks are expected to report a 16 percent jump in profits in the fourth quarter compared to a year earlier according to data collected by financial firm FactSet. If that holds, it would mean banking profits grew faster than overall profits for the S&P 500 stock index to end the year.

Not that that matters to banking stocks. The banking sector is down 11 percent since October. Smaller, regional bank stocks have fared even worse as a group - down 16 percent.

It remains to be seen if the market is in a mood to listen to earnings reports, but long-term investors should, especially when it comes to banks. Loan growth and credit quality are places to examine the health of a bank's business and, by extension, what its business says about the broader economy.

A strong job market underpins the demand for credit, and the job market has been strong. Meantime, the Federal Reserve has indicated it will be patient before hiking interest rates again. That may help keep short-term borrowing rates low for banks, an important source of money for banks to turn into longer-term and higher-interest paying loans.

Investors should watch the price trends for bank stocks in the market, just as they need to hear from the banks themselves.



Financial journalist Tom Hudson hosts "The Sunshine Economy" on WLRN-FM in Miami, where he is the vice president of news. He is the former co-anchor and managing editor of "Nightly Business Report" on public television. Follow him on Twitter @HudsonsView.

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