Banks get a boost, but...
No Friday the 13th spookiness for financial stocks thanks to solid earnings from JPMorgan Chase, Wells Fargo and Citi. Still, there are reasons for top financial firms to be nervous about the future.
Megabanks JPMorgan Chase, Wells Fargo and Citigroup all posted impressive earnings Friday morning. The news lifted their stocks…each rose around 3% to 4%…as well as the rest of the financial sector.
The solid numbers seem to indicate that rising interest rates still aren’t putting a major dent in consumer spending or dealmaking by large businesses. JPMorgan Chase’s consumer and community banking unit posted a 7% increase in revenue from the second quarter and nearly 30% jump from the third quarter of 2022, for example.
Still, there are some clouds on the horizon. JPMorgan Chase CEO Jamie Dimon noted in the bank’s earnings release that even though “U.S. consumers and businesses generally remain healthy…consumers are spending down their excess cash buffers.” Dimon added that “persistently tight labor markets as well as extremely high government debt levels with the largest peacetime fiscal deficits ever are increasing the risks that inflation remains elevated and that interest rates rise further from here.”
Wells Fargo CEO Charlie Scharf also expressed some reservations, saying that “while the economy has continued to be resilient, we are seeing the impact of the slowing economy with loan balances declining and charge-offs continuing to deteriorate modestly.” And Citi CEO Jane Fraser said that “a continued deceleration in spending indicates an increasingly cautious consumer.”
Banks have to contend with the increased chaos around the globe as well. Dimon warned that the war in Ukraine and recent attacks by Hamas on Israel “may have far-reaching impacts on energy and food markets, global trade, and geopolitical relationships.”
“This may be the most dangerous time the world has seen in decades,” Dimon said.
That’s a telling sign. Big businesses clearly are nervous about the impact that all this conflict will have on the global economy. So even though top banks got “earnings season” off to an impressive start, investors and Corporate America remain worried about the future.
Bank results also failed to lift the overall market. The Dow was flat in late morning trading Friday while the S&P 500 and Nasdaq were both nursing losses.