Three American banks from the “Big Six” increased profits in the third quarter

Profits at three major U.S. banks—JPMorgan Chase, Wells Fargo and Citigroup—rose significantly in the quarter. According to analysts, this demonstrates the resilience of large banks and the US economy as a whole in the face of macroeconomic instability. At the same time, bank management speaks of possible further economic difficulties.

Today, October 13, three large American banks – JPMorgan Chase (.pdf), Wells Fargo (.pdf) and Citigroup (.pdf) — presented financial statements for the third quarter. All of them ended the quarter with revenue and profit growth, with JPMorgan Chase and Wells Fargo showing especially strong growth in profit. The quarterly results are seen as evidence that American banks, at least the large ones, managed to overcome the crisis moment of the first half of the year, when several regional banks went bankrupt at once – Signature Bank, Silicon Valley Bank And First Republic Bank (it came under control of JPMorgan).

According to John Ingram, chief investment officer of Crestwood Advisors, such bank results also indicate that the American economy as a whole remains stable. At the same time, the banks themselves warn of possible economic difficulties in the future.

The growth in income of large banks is largely due to the increase in the Fed key rate, since the amounts they receive from interest significantly exceed what banks pay out to deposit holders.

In such conditions, one of the important parameters that investors look at is net interest income – the amount received from interest on loans, minus the amount paid as interest on deposits.

Revenue JPMorgan grew by 22%, amounting to $39.9 billion. The bank’s net profit increased by 35%, to $13.1 billion. These results were better than the expectations of analysts surveyed by FactSet. The bank’s shares rose by 3% after the publication of the report. Net interest income was $22.7 billion, an increase of 30%. Profits at JPMorgan’s investment arm fell 12% to $3.1 billion as market conditions remained challenging. But this is offset by an increase in the profit of the bank’s retail division – by 36%, to $5.9 billion.

JPMorgan CEO Jamie Dimon noted that the financial health of US households and businesses remains generally good. At the same time, he noted the significant US budget deficit, which will reach $1.7 trillion by the end of the year, as well as the possibility of further growth of the key rate as negative factors. “This may be the most dangerous time the world has seen in decades,” Mr. Dimon said of the current geopolitical situation.

According to the head of JPMorgan, the situation in Ukraine and Israel “could have a far-reaching impact on the energy and food markets, global trade and geopolitical relations.”

Quarterly revenue Wells Fargo increased by 6.6%, to $20.9 billion. The bank’s net profit showed a very significant increase – by 61%, to $5.8 billion. These results were better than expected, so the bank’s shares rose by 3.6%. Net interest income increased 8% to $13.1 billion.

“The growth of our revenue compared to last year includes both an increase in interest income (on loans.— “Kommersant”) and non-interest earnings growth as we benefited from both rate increases and the investments we make,” said Wells Fargo CEO Charlie Scharf. At the same time, in his opinion, “although the economy remains stable, we see a slowdown in the economy (which is manifested in – “Kommersant”) a decrease in loan balances and a gradual increase in the number of bad debts.”

Citigroup finished the third quarter with revenue growth by 9%, to $20.1 billion. Its profit did not grow as significantly as that of the other two banks – by 2%, to $3.5 billion. However, this is an improvement compared to the previous quarter, when Citigroup profit fell by 36% due to rising costs and loan servicing. The bank’s net interest income rose 10% in the third quarter to $13.8 billion.

The remaining three banks from the “big six” will report next week. Bank of America and Goldman Sachs are due to report on Tuesday, October 17, followed by Morgan Stanley the next day, October 18.

Yana Rozhdestvenskaya