FirstFT: US banks set for profits boost

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Good morning. The largest US banks are set this year to earn higher profits from their lending businesses than expected as it becomes more likely that the Federal Reserve will make only modest cuts to benchmark interest rates.

Over the past two years, big banks such as JPMorgan Chase, Bank of America, Citigroup and Wells Fargo charged more for loans in lockstep with the Fed lifting interest rates, without passing on the increase in full to depositors.

The banks had warned investors in January that these profits from lending — so-called net interest income — would come down in 2024 but the outlook has improved with the market now expecting the Fed to make between two and three interest rate cuts over the course of the year.

Analysts said some banks could lift their guidance when they report first-quarter results beginning this week. JPMorgan, Citi and Wells will report earnings on Friday while Goldman Sachs publishes earnings on Monday. Morgan Stanley and BofA will publish results on April 16. US banking editor Joshua Franklin and US banking correspondent Stephen Gandel have written a full preview.

Here’s what I’ll be watching today:

• David Cameron in Washington: The UK foreign secretary will meet secretary of state Antony Blinken before holding talks with Republican and Democratic lawmakers as he hopes to rally support for Ukraine. His meetings come on the back of an audience with former president Donald Trump in Florida. Meanwhile, Russia’s foreign minister Sergei Lavrov is in Beijing.

• Economic data: Mexico’s statistics agency INEGI reports inflation data for March and the Argentine government is due to release February industrial production data. Brazil’s central bank releases results of a weekly economic survey that will include forecasts for gross domestic product, and interest and inflation rates.

• ICJ: Germany will present at the UN’s top court its legal response to Nicaragua’s accusations yesterday that Berlin was “facilitating genocide” in Gaza.

• Ireland: The country’s parliament returns from recess. Simon Harris will be voted in as taoiseach, leading Ireland’s three-party coalition after Leo Varadkar’s unexpected resignation last month.

Five more top stories

1. Elon Musk has predicted that new artificial intelligence models will surpass human intelligence by the end of next year, so long as the supply of electricity and hardware can satisfy the demands of the increasingly powerful technology. Within the next five years, the capabilities of AI will probably exceed that of all humans, the billionaire predicted in an interview on X with Nicolai Tangen, chief executive of Norges Bank Investment Management.

2. TikTok workers in the US have been saddled with multimillion-dollar tax liabilities on shares they are unable to sell, at a time when the Chinese-owned video-sharing app is battling a potential US ban. ByteDance, the app’s Beijing-based parent, is facing a backlash from US employees over its stock awards programme, according to interviews with more than a dozen current and former staff. Read the full story.

3. Imported vehicles are piling up at European ports, turning them into “car parks”. Port and car industry executives have pointed to a backlog of Chinese electric cars as one of the leading causes of the problem, with some companies booking shipping delivery slots without ordering onward transportation. Here are other reasons behind the build-up.

4. Several large Taiwanese manufacturers are considering setting up second headquarters overseas to ensure they can keep operating in the event of a Chinese attack on their country. According to several people involved in the deliberations, companies exploring such options include Lite-On and Qisda, which make electronics components and devices for consumer, telecoms, automotive and medical applications. Kathrin Hille has more details from Taipei.

5. Israel has set a date for an assault on Rafah, Benjamin Netanyahu said yesterday, despite facing increasingly public US pressure not to carry out a major operation there. The southern Gaza town has become Hamas’s last stronghold but also shelters more than 1mn people displaced by fighting elsewhere in the devastated enclave. Here’s why Israel’s prime minister has pledged to move forward with an attack.

Today’s Big Read

Daniel Noboa knew that international blowback after Ecuador’s police stormed the Mexican embassy would be swift. But the Ecuadorean strongman took a bigger gamble: that the raid would be to his benefit at home. Since launching a war on drug traffickers driving a wave of violence across the once-peaceful Andean nation, the president’s popularity has surged despite growing concerns over a slide towards authoritarianism. But Friday’s raid on the Mexican embassy marked a drastic escalation of the president’s hardline stance.

We’re also reading . . . 

• Opinion: The belief in Tokyo is that Japan is living in dangerous times, in a dangerous region and needs to get closer to America in response, writes Gideon Rachman.

• European defence: MBDA, a pan-European weapons maker that successfully overcame national interests to compete with US rivals, is being held up as a model of defence co-operation needed in the region.

• Diversity: Stephen Bush explores what a recent photo of the Arsenal Women’s football team can teach us about representation and success.

• Succession: With family businesses around the world set to pass trillions of dollars to children, advisers are putting greater emphasis on planning for the next generation.

Chart of the day

Millions of people watched the total solar eclipse yesterday as it swept across Central and North America. The alignment of the Moon and Sun began on Mexico’s Pacific coast at about 11am local time before extending 5,400km north-east to Newfoundland in Canada by 5pm local time. Here’s more on the spectacular celestial event that turned day into night.

Take a break from the news

V-necks have been verboten for as long as most of us can remember, writes Teo van den Broeke. But with menswear runways full of them, celebrities wearing them on the red carpet and stores placing them at the heart of their new offerings, is the style back?

Additional contributions from Tee Zhuo and Benjamin Wilhelm