Major bank stocks took a hit in Tuesday's trading session after Federal Reserve Vice Chair for Supervision Michael Barr announced updated capital requirement regulations. KBW managing director David Konrad joins Asking for a Trend to discuss the state of the sector and break down the Fed's latest move.

JPMorgan Chase & Co. (JPM) President and COO Daniel Pinto believes that analysts may have too rosy of expectations for the bank's net interest income expenses in 2025. Konrad notes that his estimate is below Wall Street's own guidance, and adds, "What happened this past year is their guidance kept being raised because they're asset sensitive, the forward curve didn't materialize, and the Fed really didn't cut rates yet obviously this year. So their estimates this year beat expectations."

As the Federal Reserve moves into an interest rate easing cycle, Konrad expects "asset-sensitive" names like JPMorgan to experience some pressure in its net interest income.

Meanwhile, Goldman Sachs (GS) announced that trading revenue could fall 10% in the third quarter, which Konrad calls "disappointing." He notes that trading will be a more volatile number as it faces seasonality and volume issues. He adds, "We think that's that's a little bit not necessarily a trend line, but a tough quarter there."

With the Fed unveiling new proposed capital requirements, Konrad argues that "reducing the capital requirements by 50% was kind of in the market a little bit. And that's really basically where it came into."

Fed Vice Chair of Supervision Barr expects capital to rise about 9%, which Konrad says "feels about right" and comes in "largely in-line" with expectations: "The Fed typically gold plates the international standards, and then they took it a step further with this proposal. So what ended up happening is you had the US banks holding a lot more capital than the global banks. And so I think this largely adjusts that."

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This post was written by Melanie Riehl