Bank titans in the US ride rate hikes and avoid storms. In the first quarter, U.S. banking giants profited from increased interest payments, shrugging off a sector shake-up and setting aside billions if loans go bad as the economy weakens.
On Friday, first-quarter 2023 profits from JPMorgan Chase & Co (JPM.N), Citigroup Inc (C.N), and Wells Fargo & Co (WFC.N) surpassed Wall Street estimates as consumer and business spending remained up despite rate hikes. However, all three detected indications of a downturn and made adjustments.
“Goliath is Winning,” Wells Fargo analyst Mike Mayo wrote in a note noting growth, scale, and resiliency in a “uniquely strong quarter” for JPMorgan, which he dubbed “a port in the storm” during recent banking industry turmoil.
As the U.S. Federal Reserve aggressively raises interest rates to manage inflation and two mid-sized banks collapse, banks are putting up rainy-day savings to avoid an economic slump.
JPMorgan CEO Jamie Dimon cautioned that while the U.S. economy is strong, the rapid collapse of Silicon Valley Bank (SVB) and Signature Bank last month might make lenders more conservative and hurt consumer spending.
“The storm clouds that we have been monitoring for the past year remain on the horizon, and the banking industry turmoil adds to these risks,” Dimon warned.
Investment banking revenue fell 24% at JPMorgan in 2023 as the large banks struggled to profit.
In the first quarter, increasing interest rates, soaring inflation, and recession worries slowed global M&A activity to its lowest level in almost a decade.
According to Dealogic, first-quarter M&A volumes fell 48% to $575.1 billion as of March 30 from $1.1 trillion the previous year.
