Vertiv Introduces New Single-Phase Uninterruptible Power Supply for Distributed Information Technology (IT) Networks and Edge Computing Applications in Europe, Middle East, and Africa (EMEA)Read more Students from JA Zimbabwe Win 2023 De La Vega Global Entrepreneurship AwardRead more Top International Prospects to Travel to Salt Lake City for Seventh Annual Basketball Without Borders Global CampRead more Rise of the Robots as Saudi Arabia Underscores Global Data and Artificial Intelligence (AI) Aspirations with DeepFest Debut at LEAP23Read more Somalia: ‘I sold the last three goats, they were likely to die’Read more Merck Foundation and African First Ladies marking World Cancer Day 2023 through 110 scholarships of Oncology Fellowships in 25 countriesRead more Supporting women leaders and aspirants to unleash their potentialRead more Fake medicines kill almost 500,000 sub-Saharan Africans a year: United Nations Office on Drugs and Crime (UNODC) reportRead more Climate crisis and migration: Greta Thunberg supports International Organization for Migration (IOM) over ‘life and death’ issueRead more United Nations (UN) Convenes Lake Chad Countries, Amid Growing Regional CrisisRead more

US bank results highlight risk and resiliency

show caption
Bank of America, became the latest US financial giant to report lower profits, said consumers remained resilient./AFP
Print Friendly and PDF

Jul 19, 2022 - 08:29 AM

NEW YORK — Despite mounting worries over inflation, just-released bank earnings painted a resilient picture of the US economy and consumer, generating talk that any recession might be milder than earlier downturns.

Reports from six US banking giants showed a significant drop in profits from the heady year-ago period, with most of the group establishing fresh provisions in case of defaults.

Executives expressed caution about what’s to come in light of the growing hit from higher gasoline and food prices, along with the burden of increased lending costs following several Federal Reserve interest rate hikes and persistent supply chain problems.

But banks still haven’t seen a significant rise in charge-offs from bad loans. They say many households still have a buffer of savings after conserving funds during the height of the pandemic when the federal government had generous relief programs.

Citigroup Chief Financial Officer Jane Fraser noted “sharply lower” consumer confidence compared with earlier in the year.

“That said, while sentiment has shifted, little of the data I see tells me the US is on the cusp of a recession,” Fraser said Friday, adding that households savings provided “a cushion for future stress” amid a tight job market.

Fraser contrasted the backdrop in the United States with Europe, where vulnerability to Russian energy could make for a “difficult winter.”

Executives acknowledged that the rising price of fuel and other essential goods poses burden to low-income households who are cutting back.

But most of the bank’s clients are not in this situation now.

“US consumers remain quite resilient,” Bank of America Chief Executive Brian Moynihan said Monday. “Consumers continue to spend at a healthy pace even as some time has passed since the receipt of any stimulus.”

JPMorgan Chase Chief Executive described the consumer as “in great shape,” which means that even if there is a recession, they’re entering it in “far better shape” compared with 2008 or 2009.

Muted tone 

On Monday Bank of America reported $6.2 billion in second-quarter profits, a 34 percent drop compared with the year-ago period when results were lifted by a large reserve release amid a strengthening macroeconomic backdrop.

In spite of weakness in some parts of the business, results were boosted by higher net interest income following Fed rate hikes.

Bank of America also enjoyed growth in overall loans and pointed to “improvement” in overall asset quality.

At Goldman Sachs — the final of the US banking giants to report — profits fell 48 percent to $2.8 billion, again due in part to its decision to set aside $667 million in provisions for credit losses.

Operations were mixed, with a big jump in revenues tied to trading amid volatile markets offsetting the hit from a drop in revenues connected to mergers and acquisition advising and loan underwriting.

The reports came on the heels of similar releases last week from JPMorgan Chase, Citigroup, Morgan Stanley and Wells Fargo.

Stuart Plesser, a senior director at S&P Global Ratings described the industry’s overall tone as muted.

“They’re not saying anything’s disastrous, they’re not optimistic, either,” Plesser said.

“If you read the news, you got this possibility with inflation, the higher rate increases and all the other issues, but you can’t point to anything in the results,” he added.

MAORANDCITIES.COM uses both Facebook and Disqus comment systems to make it easier for you to contribute. We encourage all readers to share their views on our articles and blog posts. All comments should be relevant to the topic. By posting, you agree to our Privacy Policy. We are committed to maintaining a lively but civil forum for discussion, so we ask you to avoid personal attacks, name-calling, foul language or other inappropriate behavior. Please keep your comments relevant and respectful. By leaving the ‘Post to Facebook’ box selected – when using Facebook comment system – your comment will be published to your Facebook profile in addition to the space below. If you encounter a comment that is abusive, click the “X” in the upper right corner of the Facebook comment box to report spam or abuse. You can also email us.