Flagging loan margins, one-off charges drag down profit at major US banks
WASHINGTON (Reuters) -Major U.S. banks reported lower profit on Friday in a choppy fourth quarter clouded by special charges and job cuts, with signs an income boost from high interest rates is waning and some consumer loans are starting to sour.
Still, JPMorgan, Wells Fargo, Bank of America, and Citigroup, the country's largest lenders, struck an upbeat tone on the economy, noting that American consumers remained resilient even as defaults on consumer loans began returning to pre-pandemic levels.
«This has been a period of credit normalization but the banks have been well ahead in terms of their reserves,» said Mac Sykes, portfolio manager at Gabelli Funds, which holds shares in JPMorgan, Bank of America and Wells Fargo. «The wild card will be how the economy tracks this year but the big banks are well situated to handle any stress.»
The Fed hiked rates last year in a bid to tame inflation. But with price increases slowing, the potential pace of interest rate cuts this year, and whether the economy will avoid a recession, is the key question hanging over markets.
Jamie Dimon, CEO of JPMorgan Chase (NYSE:JPM), the biggest U.S. bank and a bellwether for the economy, said consumers were still spending and that the markets were expecting a soft landing, but warned government spending on green energy, healthcare and the military could continue to push prices higher.
U.S. consumer prices increased more than expected in December, with Americans paying more for shelter and healthcare.
«This may lead inflation to be stickier and rates to be higher than markets expect,» Dimon said. He also warned Fed rate cuts could drain liquidity from the system, and that the wars in Ukraine and the Middle East could cause global disruptions.
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