The first-quarter earnings season for U.S. banks kicked off on April 13, with Goldman Sachs leading the releases. The sector faces dual pressures from resurgent inflation driven by Middle East tensions and risks in the $1.8 trillion private credit market. The KBW Bank Index fell 6% in the first quarter, its worst quarterly performance since the 2023 regional banking crisis.

Bank stocks are trading at a price-to-earnings ratio of just 12 times, a 40% discount to the S&P 500. Investors are focusing on how executives assess two key risks: prolonged high interest rates if inflation stays elevated, and rising default risks in private credit that could damage asset quality.

Major banks including JPMorgan Chase, Citigroup and Wells Fargo will report results in the coming days. Analysts expect earnings growth to remain under pressure. Weak results could trigger a fresh correction in financial stocks and weigh on the broader U.S. market.