The largest American banks confirmed that they are performing well, as businesses and consumers continue to spend and borrow, even if interest rates remain at their highest levels in 22 years. JPMorgan Chase, Citigroup and Well Fargo were able to charge higher fees on loans while their deposit payments increased more slowly.
The three lenders earned a total of $49 billion in net interest income during the third quarter, an amount that increased by 29% year over year. For JPMorgan, the increase in loan accounts was sufficient to offset the weakness the bank experienced in its commercial and investment banking services. Net income also rose by more than a third. As for Wells Fargo Bank, it achieved a 60% jump. As for Citibank, it recorded a modest increase that did not exceed 2% on an annual basis.
But this flexibility on the part of the big three banks may bode ill for smaller regional banks in the United States, as the latter have continued to lose customers and deposits to major competing banks. For example, the KBW (Index) index of regional banks fell about 1% on Friday, while shares of JPMorgan, Wells Fargo and Citibank witnessed increases between 2.4% and 3.4%.
Despite this, even among the largest banks, there are signs that the jump witnessed in net interest income is not sustainable, as consumers have become more cautious and cautious. The cost of financing is also rising, which will curb the growth of the net interest margin. Interest costs rose by 170% at JP Morgan year-on-year, even though total deposits fell by 1%. Banks, Wells Fargo and Citi also witnessed a decrease in deposits by 3% on an annual basis.
Of the three banks, Citibank appears to have the narrowest wiggle room when it comes to financing costs, as only 15% of US deposits at the bank are interest-free accounts. These deposits, which represent the cheapest source of financing at banks, witnessed a decline of 5% between the second and third quarters. As for JP Morgan, these deposits decreased by 1% between the second and third quarters, but they represent about a third of the total American deposits with the bank. Perhaps JP Morgan’s strong balance sheet and diversified business model explain why the bank’s stock continues to trade at a premium compared to other banks, on a price-to-par value basis.
2023-10-14 19:00:00
#American #banks #bigger
