Big banking institutions including JPMorgan Chase (JPM) and Citigroup (C) will release their first-quarter earnings reports this week. As uncertainty from geopolitical conflicts and doubts over whether the Federal Reserve will even make interest rate cuts in 2024, some on Wall Street turn to the financial sector to peak into the health of the market.

RBC Capital Managing Director Gerard Cassidy joins Market Domination to break down expectations for upcoming bank earnings and the top themes investors should keep in mind.

Cassidy outlines his top picks for investors during this time: "I would say going into the earnings season, we have both a money center pick which doesn't report on Friday, which of course is Bank of America (BAC), they report the following Tuesday. But also, we would say that JPMorgan is a perennial favorite. It's done very, very well. It's owned by just about everybody around the world. But, Bank of America would be the favorite pick in the quarter..."

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

JOSH LIPTON: Gerard, when you're talking to your clients, I'm curious, and they ask you, what's the one big risk for the banks, what do you tell them?

GERARD CASSIDY: It's a really good question because credit risk has always been one of the biggest risks for the banking sector. Last year, as you know, we saw three banks fail. And they didn't fail from the traditional reasons of credit risk. They failed because of liquidity risk.

But the real risk to any bank is bad credit. And so when we look at that topic, aside from the net interest income inflection, which is definitely going to be discussed on the calls this quarter, the other big topic will be credit quality and the direction of credit quality. We're all very aware of what's going on in the office space, particularly the class B and class C space in our major urban markets where vacancies in some of that space is as high as 50% or 60%. And those properties' values have declined off of peak levels upwards of 75% to 80%.

But class A properties, it's nothing like that. And so I think what you're going to find is more investors are going to realize that the US banking industry, its exposure, particularly amongst the top 20 banks, to the most troubled area for credit today, office, commercial, real estate is very limited. And it's nothing like what we saw in 1990 when it was truly a debacle for the banks.

JULIE HYMAN: So that seems like it will be potentially positive news if the banks can convince investors that is the case. I'm curious if we're going to get some upward revisions from these banks' raised forecasts. And if so, which are the most likely contenders?