By David Henry

NEW YORK, (Reuters) – The earnings of the largest U.S. banks will be down sharply from a year earlier, as they have been able to benefit from exceptional dealmaking and trading and money set aside for loan loss releases.

Analyst estimates by Refinitiv II/B/E/S show that net income will drop 35% for six of America’s largest banks compared to a year prior. The Russian invasion of Ukraine in February caused a halt to investment banking revenues.

The quarter will be challenging for the biggest banks, according to analyst Christopher McGratty of Keefe, Bruyette & Woods. The biggest obstacles are 36% revenue drop in investment banking, and 18% trading.

McGratty explained that the last year was a huge one for banks’ capital markets, making comparisons difficult.

Jason Goldberg, an analyst at the firm, suggested that quarters could have short-term discomfort but promise long-term growth. Barclays Report by (LON. One example was PNC Financial Services Group’s (NYSE) March 31 revenue estimate, which was lower than expected but higher for its full year expectations.

As they enjoy higher interest rates, investors will be more focused on how banks can increase their net income. This is the difference between the income from loans and the interest earned on other funds.

The Federal Reserve will keep raising interest rates in an effort to lower inflation. Bank executives may be asked their views about whether the U.S. will see continued growth despite the ongoing war in Ukraine. Ask them if they think lower-income borrowers will be able to repay after the increase in food and gas prices.

JPMorgan Chase & Co (NYSE:), the largest bank in the United States, reports results on Wednesday.

This Thursday Citigroup Inc (NYSE:), Wells Fargo (NYSE:) & Co, Goldman Sachs Group Inc (NYSE: Morgan Stanley (NYSE:) report. The following Monday is Bank of America Corp’s (NYSE:).

Analysts anticipate that pre-provision Net Revenue, which isn’t affected by changes in Loss Reserves set during pandemics, will decline less than total profits.

Credit Suisse (SIX.) Susan Roth Katzke is expecting a 7% decrease in pre-provision Net Revenue, compared to 24% in earnings per Share at the banks that she covers.

Investors are increasingly concerned about whether JPMorgan and other banks allow expenses to rise too fast. JPMorgan saw its non-interest expense increase 11% over the quarter. This was partly due to rising wages. The bank also warns about rising acquisition and technology costs.

This quarter’s trading losses are greater for banks, especially in volatile commodities markets. These were the result of Russia’s “special military operations” in Ukraine.

Citigroup is one example of a bank that may have provisions to cover losses on Russian companies after Western nations impose sanctions. Citigroup stated that it may lose almost half its $9.8 million exposure to severe scenarios.

The extent that banks have slowed share buybacks over the past quarter is another unknown. Although buybacks increase earnings per share they could have been temperated as banks were unable to realize the losses that they incurred on bonds, which declined in value during this quarter. [L2N2W31XD]