US banks report mixed results, see consumers as still fairly healthy

NEW YORK — Large US banks reported mixed results last week, dented by exceptional costs connected to job cuts and to replenishing a federal fund tapped during last year's crisis involving midsized lenders.

But while consumer credit quality has diminished somewhat, executives continued to describe relatively resilient US economic conditions.

"The consumer credit narrative broadly is that the consumer is fine," said JPMorgan Chase Chief Financial Officer Jeremy Barnum, who characterised an uptick in charge offs for bad loans as reflecting a "normalisation" of the credit market, rather than a "deterioration."

Barnum's boss, Chief Executive Jamie Dimon, said the US economy "continued to be resilient", while noting in an earnings press release that the bank remains "cautious" in light of wars in Ukraine and Gaza, and the risk that inflation will turn out to be "stickier" than expected.

JPMorgan, the biggest US lender by assets, reported a drop in fourth-quarter profits from the year-ago period, due to costs of $2.9 billion for a Federal Deposit Insurance Corporation (FDIC) special assessment after the failures of Silicon Valley Bank and Signature Bank.

Bank of America, Citigroup and Wells Fargo all paid assessments of around $2 billion for the FDIC fund.

But JPMorgan's profits still topped analyst estimates. Overall, its profits were $9.3 billion, down 15 per cent from the year-ago period, while revenues rose 12 per cent to $38.6 billion.

Operating profits were boosted by higher net interest income following several Federal Reserve rate increases that enabled JPMorgan to charge more for loans.

"When thinking about consumer credit... what really matters is the strength of the labour market," Barnum told reporters on a conference call. "And obviously the labour market remains quite strong."

JPMorgan's increase in net interest income was not matched at other leading banks, which reported decreases in that area to the shifting balance of deposits and loans.

Overall, Bank of America reported profits of $3.1 billion, down 56 per cent, reflecting lower net interest income, as well as the hit from the FDIC special assessment.

Wells Fargo reported profits of $3.5 billion, up nine per cent, the only one of the four banks to see an increase compared with the 2022 period.

Besides the FDIC fee, Wells' results included a $1 billion hit for severance costs due to job cuts.

As with JPMorgan and Bank of America, Wells Fargo saw an increase in charge offs compared with the prior quarter.

But Chief Executive Charlie Scharf characterised credit quality as a "modest deterioration" that is "consistent with our expectations".

Citi in the red 

Citigroup was the only one of the large banks to report a fourth-quarter loss, of $1.9 billion compared with profits of $2.5 billion in the 2022 period. Revenues fell three per cent to $17.4 billion.

The results were weighed down by costs including $780 million for severance and other expenses connected to a reorganisation.

The bank has also significantly shrunk its global consumer banking footprint, divesting assets in China, Vietnam and other markets.

Once the restructure is completed, "we will have a simpler firm that can operate faster, better serve our clients and unlock value for our shareholders", Citi Chief Executive Jane Fraser said.

Overall, Citi plans to trim 20,000 jobs over the medium term.

The move will put headcount at about 180,000 in the 2026 time period, down from 240,000 at the end of 2022 — while also reflecting the expected spinoff of Citi's Mexico subsidiary, Banamex.

Shares of JPMorgan rose 1.2 per cent, while Citi fell 0.5 per cent. Bank of America dropped 1.9 per cent and Wells Fargo lost 1.8 per cent.