The outlook for America’s big banks has been clouded by the conflict between Russia and Ukraine and the disappearance of economic stimulus measures. Higher borrowing costs as the Federal Reserve raises rates have also dampened demand for mortgages and auto loans.
There were notes of caution about the economic situation. “The US economy currently remains strong with consumers continuing to spend excess cash and businesses healthy”JPMorgan Chase Chief Executive Jamie Dimon said, though he said he did not yet know “the ultimate effect of the headwinds ahead.”
The bank signaled a modest deterioration in its macroeconomic outlook, “reflecting a mild downturn in the center stage.”
JPMorgan Chase & Co, Bankf of America, Citigroup Inc and Wells Fargo & Co reported profits ranging from 6% to 50% less. Strength in trade helped offset a slump in investment banking, while interest rate hikes by the Fed helped earnings.
“Banking earnings today were strong, with net interest earnings driving earnings, credit reserves rising significantly year-over-year and investment banking fees staying low, all largely reflecting the interest rate and the economic environment”, said Peter Torrente, KPMG US National Sector Leader for Banking and Capital Markets.
JPMorgan’s profit beat estimates, rising 6% on strong trading, and it said it would resume share buybacks. Bank of America reported a 2% rise in earnings as higher rates boosted revenue.
Nevertheless, Citigroup Inc reported a 21% drop in profits with investment banking getting hit. Wells Fargo said profits were down 50% as it racked up $3 billion in costs.
“We finished the year on a strong note, increasing earnings year-over-year in the fourth quarter in an increasingly sluggish economic environment”Bank of America CEO Brian Moynihan said in a statement, describing 2022 as one of the best years for the bank.
The four banks set aside a total of about $4 billion in funds to prepare for bad loans: JPMorgan set aside $1.4 billion, Wells Fargo set aside $957 million, Bank of America set aside $1.1 billion, and Citi set aside $640 million. . Morgan Stanley and Goldman Sachs report next week.
Banks have been affected by a fall in the mergers, acquisitions and initial public offerings. Global investment banking revenue plunged to $15.3bn in the fourth quartermore than 50% less than the prior-year quarter, according to Dealogic data.
The losing streak for JPMorgan’s investment banking unit continued in the quarter, with revenue plunging 57% as corporate executives battened down the hatches to prepare for a potential downturn rather than spend on deals. Bank of America’s investment banking fees more than halved in the quarter.
However, JPM’s trading revenue benefited from market volatility as investors repositioned their bets to navigate a high interest rate environment.
Meanwhile, consumer businesses were a key focus of banks’ results. Household accounts have been supported for much of the pandemic by a strong job market and government stimulus, and while consumers are generally in good financial shape more of them are beginning to fall behind on payments.
“The consumer is still in very good shape”Bank of America chief financial officer Alastair Borthwick said. “There’s a lot of pent-up demand,” especially for travel, he said.
Source: Ambito
I am a 24-year-old writer and journalist who has been working in the news industry for the past two years. I write primarily about market news, so if you’re looking for insights into what’s going on in the stock market or economic indicators, you’ve come to the right place. I also dabble in writing articles on lifestyle trends and pop culture news.
