Higher interest rates continue to pressure some of the country’s biggest banks, and their lending machines are showing signs of consumer weakness.
JPMorgan Chase and Wells Fargo both reported a drop in quarterly profit Friday. Citigroup posted a rise in profit, driven in part by the bank’s cost-cutting measures, but set aside more provisions for potential losses in their credit-card business.
JPMorgan’s second-quarter profit declined 9% year-over-year to $13.1 billion. That figure excludes an $8 billion gain the bank received on an exchange of its shares of Visa and other one-time items.
The bank’s net interest income, a measure of the difference between what banks pay out on deposits and charge on loans, rose to $22.9 billion, up 5% versus a year earlier.
JPMorgan Chief Executive Jamie Dimon repeated his view that interest rates could wind up staying higher than some economists have forecast.
“Market valuations and credit spreads seem to reflect a rather benign economic outlook,” he said. “But there are still multiple inflationary forces in front of us: large fiscal deficits, infrastructure needs, restructuring of trade and remilitarization of the world.”
Wells Fargo, whose business mix leans more heavily toward consumers than its peers, reported a second-quarter profit of $4.91 billion, down 1% from around $4.94 billion a year earlier. The San Francisco-based bank also dimmed its outlook for the year. It predicted net interest income — a key profitability measure of the difference between what banks earn on loans and pay out to depositors — would fall between 8% and 9%.
Citigroup, which is in the midst of a multi-year restructuring plan, showed signs last quarter that those efforts were bearing fruit. The bank reported net income of $3.22 billion, a 10% increase from the same period a year ago. Revenue rose to $20.14 billion, including a $400 million gain from the Visa share exchange. That marked a 4% rise from a year earlier.
All of Citi’s divisions posted better numbers for the first time since the bank broke out its results into five units late last year. Operating expenses fell 2% to $13.35 billion, thanks to a flurry of business exits and moves undertaken by Chief Executive Jane Fraser.