The big US banks once again posted sharply higher profits in the third quarter, the good health of the economy allowing them to relax the money put aside at the start of the pandemic and boosting their business advisory activities.
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Their bosses are watching a few potential threats to growth, such as rising prices or supply problems, but are not overly concerned about them.
"Two years ago we were facing the Covid, a great recession, a global pandemic, and all that is now behind us, which is a good thing"
, summarized Jamie Dimon, the CEO of the largest American bank , JPMorgan Chase. For him, supply chain problems are temporary. And having a little inflation during a period of growth,
“that's okay”
.
"Even though the United States faces challenges in the labor market and the materials supply chain, the economy continues to advance."
, also noted Brian Moynihan, the boss of Bank of America.
This recovery
"stimulates the confidence of businesses and consumers,"
said Jane Fraser, head of Citigroup.
The latter, however, remains on its guard, ensuring in particular monitoring
"the slowdown in China and its impact on global growth, inflation and current constraints on labor, materials and energy markets, and finally what will happen in the negotiations on the debt ceiling in the United States ”
.
Consumers spend
At the start of the health crisis, American banks built up a large financial cushion of tens of billions of dollars in case their customers default en masse. But aid from the government and the US central bank (Fed) has kept consumers and businesses, for the most part, afloat. Institutions therefore continue to gradually release their reserves, which inflates their net profits: + 58% at Bank of America, + 59% at Wells Fargo, + 48% at Citi, + 24% at JPMorgan Chase.
A sign of the general financial health of individuals and small businesses, spending on credit and debit cards is increasing, by 26% at JPMorgan Chase or 20% at Citi for example. And they're borrowing less, with total personal and small business lending down 2% at JPMorgan or 12% at Bank of America compared to the same period last year. At these two institutions, however, it went up a bit compared to the previous quarter, an encouraging sign for banks which earn part of their money by lending.
The low level of interest rates, on the other hand, generally continues to weigh on the net interest income of institutions, an important criterion which corresponds to the difference between the interest they earn on loans granted to their clients and the interest that they pay to savers.
Controlled costs
The giants of Wall Street have at the same time benefited from the good performance of their activities with large companies, institutional investors and large fortunes. Bankers advising companies have been particularly active, with companies feeling confident enough to raise money in the markets or carry out M&A transactions. They saw their revenues increase by 67% at Morgan Stanley, for example, by 39% at Citi, by 45% at JPMorgan.
Market activities were more mixed, with income from brokerage of fixed-rate financial products falling while those from brokerage on equity markets jumped (+ 25% at Morgan Stanley, + 40% at Citi, + 30% at JPMorgan). Traders took advantage of a particularly volatile September.
For Gregori Volokhine, portfolio manager for Meeschaert Financial Services, the banks have also
“fairly well controlled their costs”
and
“the small salary increases granted by several of them have not affected their profitability”
.
Taken as a whole, the results of financial institutions reflect, according to him, an economy
"which is doing very well"
but which also
"still largely
benefits
from the largesse of the Fed"
.
"We'll have to see how the economy reacts when the Fed starts to reduce its support and if inflation remains high in six months," he
notes.
