The big ones United States banks announced this Friday a quarter of losses, due to the economic slowdown, fears of a possible recession and geopolitical tensions.
However, JPMorgan, Citigroup and Wells Fargo beat earnings estimates for their third quarter, and shares of all three banks rose on the New York Stock Exchange on the results.
“Headwinds”
The largest bank in the United States, JPMorgan Chase, announced this Friday that it has earned 26,668 million dollars in the first nine months of the year, 30% less than in the same period last year, while its turnover rose 2%.
“In the US, consumers continue to spend with strong balance sheets, job openings are plentiful and businesses remain healthy,” the bank’s chairman and CEO, Jamie Dimon, noted in the statement.
However, the chief executive stressed that “there are significant headwinds”, referring to “stubbornly high inflation leading to higher global interest rates, the uncertain impacts of quantitative tightening, the war in Ukraine that is escalating every geopolitical risks and the fragile state of oil supply and prices.
“While we hope for the best, we always remain vigilant and prepared for poor outcomes so that we can continue to serve customers even in the most difficult of times,” he concluded.
In general, raising interest rates – the Federal Reserve (Fed) raised the benchmark rate from almost zero in March to the current range of 3% to 3.25%, and points to further increases – is good for banks because they can charge consumers more for loans.
However, the risk of an economic slowdown, higher borrowing costs and the war in Ukraine could cloud the economic outlook and hurt future earnings.
Timetable for leaving Russia
Citigroup has established a schedule to leave Russia, since the executive director of the firm, Jane Fraser, indicated that the entity wants to “reduce its presence” in that country, from which almost all the large Western groups have left due to the war of Ukraine
“We continue to reduce our operations and exposure to Russia and will end almost all of the institutional banking services that we offer in the coming quarter,” he noted.
In addition, Citigroup announced that in the first 9 months it obtained a net profit of 12,332 million dollars, 34% less year-on-year, and that its turnover increased by 4%.
Banks increase their reserves
With their eyes on a cold economic winter and a 2023 ever closer to recession, the three banks chose to increase their reserves.
Wells Fargo CEO Charlie Scharf also noted that the bank’s increased provisions for potential loan default losses come as a result of “loan growth and a less favorable economic environment.”
This entity announced a profit of 10,318 million dollars in the first 9 months, 35% less than in the same year of the previous year, and had a cumulative turnover between January and September of 6% less compared to that period of last year .
Wall Street’s response
As the largest US banks by assets, their results will be closely watched by investors for clues as to how banks are navigating a confusing environment.
The entities gave their results before the bell rang on Wall Street, and after the opening of the stock market, JP Morgan shares rose 2.91%; those of Wells Fargo, 3.61%, and those of Citigroup, 1.44%.
Next week, Bank of America will give its results on Monday and Goldman Sachs will do it on Tuesday.
