US banks reported mixed fourth-quarter results last month as operating income fell after the Federal Reserve scaled back its asset purchases. They are now dealing with high inflation and the likelihood of multiple rate hikes.
Several top executives commented on market conditions at Credit Suisse’s Financial Services Forum in Florida.
Bank of America is enough worried about inflation enough to stress test his portfolio that the Fed’s policy makers may not be able to control it and prevent the country from slipping into a recession, said its chief executive, Brian Moynihan. “We have to review those scenarios,” He said.
The CEO of Goldman Sachs, David Solomonwarned that runaway inflation could be a drag on growth.
“We are going from a very easy money environment and below trend inflation to a tighter money environment and above trend inflation. The economic environment is different and that will have consequences.”said.
Solomon added that “Everyone is used to asset appreciation and we may have a period of time where there is less asset appreciation.”
Mike Santomassimofinancial president of Wells Fargo & Co. the fourth largest bank in the United States, He noted that credit spreads had widened and “that’s an area to watch to see if cracks start to emerge.”
High inflation and expectations of more aggressive rate hikes by the Fed have roiled markets this year, causing the S&P500 is down 7% year-to-date, while bond yields have soared and the yield curve has flattened.
The financial president of Morgan Stanley, Sharon Yeshaya, said the bank had seen “a lot of uncertainty in the market during the last two weeks”, which has led companies to postpone transactions.
Trading and investment banking activity has slowed since 2021 but remains healthy, Solomon said.
Moynihan, of Bank of America, adopted a similar tone, saying that The bank’s capital markets business is “down” so far in 2022, but it continues to see strong client activity.
Source: Ambito
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