The nation's largest banks are sagging profits as interest rates remain high, even as lenders have had to set aside billions of dollars to replenish deposit insurance funds that were severely depleted during last spring's mid-sized bank crisis. is producing.
JPMorgan Chase, Bank of America and Wells Fargo reported fourth-quarter 2023 profits on Friday that beat analysts' expectations, and together they offer accounts to about a third of all Americans. Banks reported that customers continue to spend.
Citigroup, which is in the midst of a global restructuring, reported a net loss of $1.8 billion for the quarter, compared with a profit of $2.5 billion a year earlier. The bank had warned that one-time costs associated with exiting countries such as Russia and Argentina were proving to be high. The company on Friday revealed plans to cut about 10% of its workforce as part of a restructuring that Chief Executive Officer Jane Fraser outlined last fall.
JPMorgan's profit for the final quarter of 2023 was $9.3 billion, or $3.04 per share, compared with $11 billion a year earlier. The bank said a special assessment by the Federal Deposit Insurance Corporation reduced its earnings per share by 74 cents. Analysts had expected earnings of about $3.32 per share, and investors considered the bank's performance a win given the one-time FDIC charge of $2.9 billion.
The bank's revenue for the quarter was $38.6 billion. Compared to the same period last year, revenue increased by 12%.
Unlike his colleagues at Bank of America and Wells Fargo, who appear to be optimistic about the U.S. economy, JPMorgan CEO Jamie Dimon says political leaders and investors are concerned about the economic outlook that lies ahead. He cautioned that this may be an underestimate of human suffering.
In a statement accompanying the bank's earnings report, Mr. Dimon cited wars in Ukraine and the Middle East, U.S. infrastructure and health care costs as “significant and somewhat unprecedented factors” that could cause inflation and, by extension, interest rates. He cited the rise in prices. It will remain above the level that investors are currently prepared for.
JPMorgan Chief Financial Officer Jeremy Burnham said on Friday why the central bank is predicting six interest rate cuts in 2024 when Dimon's comments seem to suggest otherwise. Asked if there was, the central bank said it had used models to predict rate cuts. “Beyond that, everyone has different views on interest rates, and that should be natural.”
Consumers and businesses faced the highest interest rates in more than 20 years as the Federal Reserve sought to rein in inflation. Rising interest rates triggered a crisis among mid-sized banks last March, with three financial institutions failing and a fourth dissolving. Federal officials have tapped the government's Deposit Insurance Fund to fully bail out depositors at two of the failed institutions and have now collected about $16.3 billion to replenish the fund, the largest amount ever. Relying on large banks for payments.
Bank of America's profit narrowed this quarter after it paid a $2.1 billion special assessment to a government fund that absorbs the costs of bank failures.was also recorded $1.6 billion bill This is related to the discontinuation of the Bloomberg Short-Term Bank Yield Index, the benchmark interest rate that replaced the London Interbank Offered Rate, which was also discontinued. This accounting adjustment will be reflected in a later quarter. The bank plans to add $1.6 billion to its interest income over the next few years.
Including these costs and adjustments, the bank reported a profit of $3.1 billion on revenue of $22 billion for the quarter, down from a profit of $7.1 billion on revenue of $24.6 billion a year earlier.
The bank's chief executive, Brian Moynihan, said it was a “solid” quarter, praising the bank's “good loan demand” and customer deposit growth. The yield has been steadily rising after last year's turmoil caused by regional bank failures and rising interest rates as investors sought higher yields. Bank of America's average deposits for the quarter were $1.9 trillion, slightly below the average a year ago.
Wells Fargo had revenue of $3.4 billion and sales of $20.4 billion, both increases from the same period last year. The bank paid a $1.9 billion valuation into the government fund and recorded $969 million in severance payments expected to occur this year. The bank's chief financial officer, Michael Santomassimo, did not provide an estimate of how many jobs are expected to be cut, but said the cuts would be widespread across the bank. He blamed the layoffs on “efficiency work we're doing across the company.”
High interest rates have helped boost banks' profits, and executives are bracing for the impact if the Federal Reserve cuts rates as expected. Wells Fargo said its net interest income could fall by at least 7% this year. Chief Executive Officer Charlie Scharf said the bank was “sensitive” to interest rates and the overall health of the U.S. economy, but said credit quality remained strong and a sign of consumer resilience. he said, taking on an optimistic tone.
Citigroup's net loss included a $1.7 billion FDIC charge, banks' buildup of loss reserves to protect against Russian and Argentine risks, and a hit from the sudden devaluation of the Argentine peso. The bank plans to cut about 20,000 jobs over the next two years, out of a total of 200,000.
