why it matters
Given its size, JPMorgan in particular has become an agent for the entire banking industry. The bank’s chief executive, Jamie Dimon, has deep political ties, and his economic predictions are as scrutinized in some circles as the speculations of central bankers.
Dimon told analysts on Friday that he expects the U.S. economy to experience a “soft landing, mild recession, or a deep recession,” but did not specify the timing of that forecast. . “Of course we would expect the best,” he said.
In its latest report, the bank listed a number of risks, including consumers running out of cash buffers and inflation remaining high. JPMorgan lost $900 million last quarter on investments in Treasuries and mortgage-backed securities that have fallen in value as interest rates have risen, but had little impact on earnings.
Wells Fargo, one of the nation’s largest mortgage lenders, is being watched by analysts for signs of economic stress. The bank’s chief executive, Charles W. Scharf, said the U.S. economy “continues to outperform most expectations.”
The bank said on Friday that bad debts in its commercial business increased, but its personal business performed fairly well, with a slight increase in credit card defaults offset by lower losses on auto loans. Loans to commercial real estate, especially office space, have been a problem, and the bank has set aside nearly $1 billion more to cover losses.
Unlike other banks, Citigroup reported a decline in second-quarter earnings, but the decline was less severe than analysts expected. “The long-awaited recovery in investment banking has yet to materialize and Citi has had a disappointing quarter,” Chief Executive Officer Jane Fraser said in a statement.
The three big banks, which reported results on Friday, have been making headlines this year thanks to their prominent role in trying to be stabilizing forces during the spring banking crisis that saw three smaller firms fail. JP Morgan bought First Republic, one of the failed banks. JP Morgan said Friday it would set aside $1.2 billion to cover losses in First Republic’s loan portfolio.
Analysts still expect the acquisition to ultimately prove worthwhile thanks to First Republic’s high net worth client base and coastal branches, and Friday’s results already show JPMorgan’s assets, This indicates that the company is strengthening its asset management division.
The conflict over the U.S. government’s debt ceiling in April and May also echoed in bank results, with Citi saying it was pushing its investment banking clients to the “sidelines” in the second quarter over fears during negotiations. It pointed out.
Many other banks are expected to release quarterly results in the next week or so. Most notable will be Wednesday’s results for Goldman Sachs, which publicly hinted at disappointing developments, and for regional banks such as Western Alliance and Comerica, which want to prove they’ve bounced back from their recent woes.