Leading US banks announced an increase in profits attributed to higher interest rates on loans. However, they sounded a note of caution, noting signs of economic slowdown and concerns about consumer health.
JPMorgan reported a 35 percent jump in profits compared to the same period last year, while Wells Fargo saw a remarkable 60 percent surge in profit. Citigroup, on the other hand, reported a more modest year-on-year gain of 2 percent.
These profit increases were attributed to higher interest rates, which have positively impacted net interest income (NII), representing the difference between interest earnings from loans and interest payouts on deposits.
JPMorgan and Wells Fargo, ranking as the first and fourth-largest US banks respectively, also raised their NII outlook. This prompted a rise in shares, with JPMorgan increasing by 2.3 percent and Wells Fargo, exceeding analysts' estimates, up by 2.8 percent. Citigroup rose by 3 percent, while regional lender PNC Financial Services fell by 1.8 percent. The KBW bank shares index, which includes regional banks, increased by 1.1 percent.
Despite the profit boost, the banks expressed concerns about the economic outlook. JPMorgan's Chairman and CEO, Jamie Dimon, stated that US consumers and businesses appeared healthy but noted that consumers were spending down their cash reserves.
Wells Fargo's CEO, Charlie Scharf, reported an increase in charge-offs in its credit card portfolio, indicating economic slowdown and deterioration in charge-offs.
Citi's CEO, Jane Fraser, mentioned a continued deceleration in spending as a sign of cautious consumers.
PNC Financial Services reported higher consumer loan delinquencies.
Dimon emphasized that the results were benefiting from "over-earning" on net interest income, which would normalize over time. JPMorgan's NII increased by 30 percent to $22.9 billion, and Wells Fargo experienced an 8 percent climb to $13.1 billion.
However, PNC's profit decreased by 4.26 percent year-on-year to $1.57 billion, with its NII declining by 2 percent. The bank cited higher yields on interest-earning assets being offset by increased funding costs.
