Big Four U.S. bank giants rake in $250-billion interest haul, say 2023 was the peak

financialpost.com:

On Friday morning, leaders at some of Wall Street’s biggest banks took turns calling an end to the record run for their biggest source of revenue.

Wells Fargo & Co. surprised analysts by predicting a nine per cent drop in net interest income for 2024, while Citigroup Inc. forecast a modest drop this year. Even JPMorgan Chase & Co., which sees its 2024 haul holding up at 2023 levels, predicts it will drop off over the course of the year.

For all the pain the United States Federal Reserve’s rapid rate hikes caused for many regional lenders, it was a boon for the biggest banks. In 2023, the four giants raked in $253 billion in NII — the difference between what it earns on its assets and what it pays on its debts — about $80 billion higher than 2021’s total. Now, most banks see rate cuts coming, all while they have to pay more on deposits or risk losing customer savings to higher-yielding options.

“There are a number of factors that can impact our results, including the ultimate path of rates, the shape of the yield curve, quantitative tightening and fiscal deficits, consumer behaviour and competitive behaviour, to name just a few,” Wells Fargo chief financial officer Mike Santomassimo said. “All of which we have little to no control over.”

U.S. banks rallied late last year after months of turmoil, as investors snapped up shares amid hopes that the Federal Reserve was done raising interest rates. Such a pivot could in theory ease concerns over deposit costs and credit quality, while prompting consumers and companies to up their borrowing. But with the pace and extent of rate hikes still uncertain, such benefits could take a while to trickle through while inflation continues to bite just and geopolitical tensions rise, all