U.S. consumers remain resilient with solid spending in the third quarter, two of the country’s largest lenders said Friday, although there are signs that higher inflation has weighed on some lower-income Americans.
JPMorgan Chase’s good results JPM (link) and Wells Fargo 
WFC (link) and the upbeat comments from its top executives are likely to further ease investors’ worries that increased borrowing costs are weighing on consumers and pushing the economy to the brink of a downturn, even as JPMorgan has increased provisions for bad loans.
“Overall, we see spending patterns as solid,” said Jeremy Barnum, chief financial officer of JPMorgan, the country’s largest lender and an indicator of the U.S. economy, adding that spending had normalized post-pandemic as the Americans bragged about traveling and eating out.
The weak jobs data had raised fears that the Federal Reserve’s interest rate hikes to curb inflation could plunge the United States into a recession or a “hard landing.”
However, in a call with analysts, Barnum said spending patterns were “consistent with the narrative that consumers are on solid footing, and consistent with a strong labor market and the current central case of some sort of economic ‘no-landing’ scenario.” .”
Michael Santomassimo, Wells Fargo’s chief financial officer, told reporters that while credit and debit card spending was down slightly from the start of the year, it was still “pretty solid.”
The market will get a more complete picture when Bank of America 
BAC and Citigroup 
C, the country’s two other major consumer banks, will report next week and release retail sales data. Several investors said Friday’s gains were a positive sign so far.
“The fact that… we’re not only averting a hard landing, but that there’s perhaps even a chance that there won’t be a landing, and that we’re able to move forward, is definitely going to be a big windfall for the banks “said Taylor Krystkowiak, vice president and investment strategist at Themes ETFs.
Still, Santomassimo warned that the cumulative impact of higher inflation would weigh on lower-income consumers, and the bank was monitoring whether that pattern spreads to higher-income customers.
Consumer sentiment also deteriorated in October amid continued frustration with high prices, a University of Michigan survey showed Friday. (link)
“If you look at the overall average, it looks good, but I think it’s more skewed toward higher-income, higher-net-worth consumers,” said Paul Nolte, senior wealth advisor and market strategist at Murphy & Sylvest in Elmhurst, Illinois .
“It’s a little more difficult for those at the lower end of the scale. We’re seeing delinquencies and car loans increasing. We’re seeing smaller deposits and more credit card balances,” he added.
Both banks have set aside cash to cover potentially at-risk loans. JPMorgan set aside (link) $3.11 billion, a jump from the $1.38 billion set aside a year ago. Wells Fargo has set aside $1.07 billion, down slightly from the $1.2 billion it set aside this time last year.
Credit card delinquencies that have persisted for more than a decade had raised fears earlier this year that Americans were over-indebted, but that picture improved in the second quarter, the Federal Reserve Bank of Philadelphia said Wednesday.
Loans maturities of one month or longer saw their sharpest decline in three years, although it would be premature to call a turning point in credit trends, the Philadelphia Fed said.
In a note Thursday, Barclays analysts said they expected credit card loan losses to continue to normalize, although at a slower pace than in recent months.
