US bank earnings show consumer finances ‘do not show high risk’

By Andrew Keshner

Prices continue to soar as September inflation data came in higher than expected earlier this week

Despite all the worries about pinching inflation and the possibility of a recession, just-released big bank earnings reports indicate that the wallets of many ordinary Americans are generally holding up as they do facing higher prices – for now.

Stock markets ended Monday on a rosy note, after starting with a dip and rebounding with a surge following September inflation data that came in hotter than expected.

Comments on third-quarter earnings calls this month from executives at JPMorgan Chase & Co. (JPM), Wells Fargo (WFC) and Citibank (C) suggested consumers still had their own rebound despite the pressure. The optimistic words, however, were cut with a dose of caution.

It’s a reminder that assessing someone’s financial health is a tricky mix of moods and also dollars and cents. Also on Friday, consumer sentiment remained gloomy but improved slightly according to the University of Michigan consumer sentiment measure and data showed retail sales flat in September.

After JPMorgan’s third-quarter earnings and revenue beat estimates, an analyst on the call asked if there were any “cracks” emerging, including for people working in the banking industry. detail.

There’s high inflation, rising interest rates, higher mortgage rates, questions about fuel prices and more, CEO Jamie Dimon said.

“It’s not a crack in the current numbers. It’s entirely predictable that it will weigh on future numbers,” said the banker, who expressed potential fears of a recession. For now though, “balance sheets are very good for consumers,” he noted at one point.

At Wells Fargo, CEO Charlie Scharf noted that average deposit balances declined from the second quarter to the third quarter, but are still above pre-pandemic levels. There is a segment of customers who are seeing their balances “decline steadily” and their balances are now below pre-pandemic levels, he said.

“It’s important to note that this is still a small percentage of our total customer base,” he said. “Overall, our consumer deposit customer health metrics, including cash flow, payroll and overdraft trends, continue to show no elevated risk concerns,” he said. declared.

Wells Fargo posted stronger-than-expected third-quarter revenue to counter the loss in analysts’ earnings estimates.

Challenges await the UK and Europe, Citi CEO Jane Fraser said, speaking hours after British Prime Minister Liz Truss sacked her Chancellor of the Exchequer on Friday.

“The U.S. economy, however, remains relatively resilient. So while we see signs of an economic slowdown, consumers and businesses remain healthy,” Fraser noted.

“Supply chain constraints are easing, the labor market remains strong, so it’s all about what it takes to really get a grip on persistently high underlying inflation,” she added. . Citi earnings exceed profit targets

Of course, the numbers and takeaways that appear on a major bank’s earnings call are just a snapshot of people’s financial situations. Indeed, inflation rates at their highest level in four decades have become a key political issue in the midterm elections which will take place in less than a month.

It should also be noted that there are whole sections of people who do not have a bank account or who use the services of a bank very little. Most Americans are “fully banked,” meaning they have a bank account and don’t use alternative financial services such as payday loans, according to Federal Reserve analysis.

But an estimated 13% are “underbanked” and another 5% are unbanked. Without access to traditional banking services, these consumers — who typically have lower incomes and are black and Hispanic — are using services such as check cashing services and payday lenders, according to Fed data.

Black, Hispanic and Native American families have been especially grappling with the toll of inflation, research and polls show

The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite closed Monday. Shares of JP Morgan, Well Fargo and Citi rose on Monday.

Wells Fargo shares are down about 9% year-to-date, while JPMorgan and Citigroup shares are down about 30% and 28%, respectively, over the same period.

-Andrew Keshner

 

(END) Dow Jones Newswire

10-17-22 2011ET

Copyright (c) 2022 Dow Jones & Company, Inc.

About Elizabeth J. Swartz

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