JPMorgan Chase, Bank of America, Wells Fargo and Citigroup, which kicked off the US earnings season, posted net profits for the fourth quarter of 2023. And that's better than expected.
However, they all also disappointed in the numbers, with Bank of America (BofA) and Citigroup even having revenue declines from a year earlier.
BofA had declines in retail banking, corporate banking, and asset management, while Citi had declines in capital markets.
The reporting of the largest universal banks (investment banks Morgan Stanley and Goldman Sachs will report on Tuesday) suffered from the effects of last year's banking crisis.
All of them had to contribute to the deposit guarantee fund in the fourth quarter.
The deposit guarantee agency, the FDIC, had to absorb about 16.3 billion in losses after the collapse of several U.S. banks.
Silicon Valley Bank (SVB) and Silvergate Bank were hit by a wave of panic and massive withdrawals in early March.
The former was placed under FDIC supervision and the latter was closed.
At the same time, Signature Bank and First Republic were plagued by contagion and sold to New York Community Bank and JPMorgan Chase, respectively, on an emergency basis.
In an attempt to stabilize the system, the FDIC has pledged to guarantee all deposits of SVB and Signature Bank customers, while the usual ceiling is $250 000 per person at one institution.
The four banks that released data on Friday paid a total of $8.6 billion into the deposit guarantee fund.
In addition to such an impressive bill, these big banks benefited from the banking crisis, which prompted many depositors and companies to leave regional banks and take refuge in larger ones considered more reliable.
Consumers feel good
During the quarter, they benefited from the high level of interest rates, which the U.S. Central Bank (Fed) raised to the highest level since early 2001.
JPMorgan Chase's net interest income (interest received minus interest paid) rose 19%.
However, the largest US credit institutions said they expect interest margins to decline as a result of a possible Fed rate cut this year.
In addition, as the US economy shows signs of slowing, US banks have increased provisions for doubtful loans, albeit in moderate proportions.
Jeremy Barnum, chief financial officer at JPMorgan Chase, sees this as normalization after an atypical sequence following the coronavirus pandemic that saw households' financial health improve.
"We're not seeing any downturn," an official said in a conference call. "The consumer is feeling good."
"Spending is steady," he continued, noting that consumption has been most resilient even for modest households.
"We are closely monitoring credit trends, and while we are seeing a slight deterioration, it remains within our expectations," commented Wells Fargo CEO Charlie Scharf.
The largest US banks, however, note the tension in the commercial real estate sector, which has been predicted crisis for several months.
This phenomenon is mainly due to the emergence of telecommuting, which has led to a reduction in office utilization.
Of the four companies that will release data on Friday, Citigroup remains in the worst position.
The bank's sweeping restructuring saw its sales fall 3% and it had to take a series of charges and provisions that cut its profits by $4.6 billion.
CEO Jane Fraser said Citi ended the quarter with a loss of $1.8 billion, showing a "very disappointing" result.
The group also announced its intention to cut 20 000 jobs in the medium term.