Stay informed about free updates
Just register to go US banks myFT Digest — delivered directly to your inbox.
US bank stocks hit their highest level since the collapse of Silicon Valley Bank on Friday as better-than-expected earnings from JPMorgan Chase and Wells Fargo boosted confidence in ” easy living” in the economy in the country.
Quarterly earnings fell at the largest and fourth-largest US banks by assets, compared with a year earlier. Third-quarter revenue at JPMorgan fell two per cent to $12.9bn, while Wells’s fell 11 per cent to $5.1bn.
However analysts had predicted that JPMorgan would report quarterly revenue of $12.1bn and Wells $4.5bn. JPMorgan shares rose 4.4 percent in New York on Friday, while Wells’ gained 5.6 percent.
The KBW bank index, which tracks the nation’s 24 largest lenders, jumped more than 3 percent, pushing the sector past its latest level in February 2023, before the crisis hit. of US banks, and to the highest close since April. 2022.
The earnings from JPMorgan and Wells are the latest indication that the Federal Reserve may be able to deal with inflation without slowing the economy: so-called soft deflation.
The Fed raised rates quickly starting in 2022 in an effort to lower inflation, but markets were more concerned about the health of the US economy, and last month the Fed cut interest rates for the first time.
JPMorgan’s chief financial officer Jeremy Barnum said: “I would say that these earnings are consistent with the easy-to-reach report – or arguably the ongoing non-reach report.”
Consumers had cut back on spending on things like travel and entertainment, Barnum added, but the changes were “in the realm of normality, rather than reflecting actual extraordinary levels of stress.” to customers”.
Wells chief executive Charlie Scharf said: “We’re looking for changes in the lives of consumers – but we’re not seeing them. Money is moving through credit cards and debit cards. It’s slow but healthy. .”
The problems for low-income Americans from high prices don’t seem to have spread to other parts of the economy, said Wells chief financial officer Michael Santomassimo.
However, Santomassimo said that Wells had not seen any economic benefit from the rate hike, and that business lenders remain cautious.
After driving profits for the majority of the past two years, banks’ profits from lending – so-called interest income – are expected to come under pressure from the drop in US interest rates.
JPMorgan reported NII of $23.5bn in the latest quarter, up 3 per cent from last year.
Wells said the NII would be worse than previously expected for the final quarter of this year, but raised its outlook for 2025.
On the other hand, JPMorgan raised its guidance for NII in 2024 to $92.5bn – from $91bn – but did not provide a 2025 outlook to any of its senior executives. Most warned last month that analysts have high hopes for the NII for the coming year.
But JPMorgan chief executive Jamie Dimon appeared frustrated on Friday by repeated questions from analysts about the bank’s outlook for NII.
“Next time, let’s give them a horrible number,” he said. “I don’t want to spend all my time on these calls doing what they’re predicting what the NII will be next year.”
JPMorgan also reported better-than-expected numbers for its investment bank. Investment banking fees were up by almost a third to $2.3bn, while income from equity trading rose by more than a quarter to $2.6bn and fixed income trading was flat at $4.5bn.
Bank of America, Citigroup and Goldman Sachs announce their results on October 15. Morgan Stanley reports the next day.
Additional reporting by Zehra Munir
#bank #stocks #ahead #SVB #hopes #soft #landing #economy
