Sawt Falasteen - US banks report mixed results, see consumers as still healthy

But while consumer credit quality has diminished somewhat, executives continued to describe a relatively solid US economy, with talk of a recession replaced by a "soft landing" of slower growth.

"We think the soft landing is a core thesis," Bank of America Chief Executive Brian Moynihan said on a conference call with analysts, adding that consumers are "still in the game" even as consumption has shifted from retail goods to going out and experiences.

"The consumer credit narrative broadly is that the consumer is fine," said JPMorgan Chase Chief Financial Officer Jeremy Barnum, who characterized an uptick in charge offs for bad loans as reflecting a "normalization" of the credit market, rather than a "deterioration."

JPMorgan, the biggest US lender by assets, reported a drop in fourth-quarter profits from the year-ago period, due to costs of $2.9 billion for a Federal Deposit Insurance Corporation (FDIC) special assessment after the failures of Silicon Valley Bank and Signature Bank.

Bank of America, Citigroup and Wells Fargo all paid assessments of around $2 billion for the FDIC fund.

But JPMorgan's profits still topped analyst estimates. Overall, its profits were $9.3 billion, down 15 percent from the year-ago period, while revenues rose 12 percent to $38.6 billion.

Operating profits were boosted by higher net interest income following several Federal Reserve rate increases that enabled JPMorgan to charge more for loans.

"When thinking about consumer credit... what really matters is the strength of the labor market," Barnum told reporters on a conference call. "And obviously the labor market remains quite strong."

JPMorgan's increase in net interest income was not matched at other leading banks, which reported decreases in that area to the shifting balance of deposits and loans.

Overall, Bank of America reported profits of $3.1 billion, down 56 percent, reflecting lower net interest income, as well as the hit from the FDIC special assessment.

Wells Fargo reported profits of $3.5 billion, up nine percent, the only one of the four banks to see an increase compared with the 2022 period, reflecting lower expenses.

Besides the FDIC fee, Wells' results included a $1 billion hit for severance costs due to job cuts.

As with JPMorgan and Bank of America, Wells Fargo saw an increase in charge offs compared with the prior quarter.

But Chief Executive Charlie Scharf characterized credit quality as a "modest deterioration" that is "consistent with our expectations."

Chief Financial Officer Michael Santomassimo told analysts that lower-income cohorts "are feeling much more stressed" than suggested by aggregated totals due to mounting toll of inflation over a longer period.

- Citi in the red -

Citigroup was the only one of the large banks to report a fourth-quarter loss, of $1.9 billion compared with profits of $2.5 billion in the 2022 period. Revenues fell three percent to $17.4 billion.

The results were weighed down by costs including $780 million for severance and other expenses connected to a reorganization.

The bank has also significantly shrunk its global consumer banking footprint, divesting assets in China, Vietnam and other markets.

Once the restructure is completed, "we will have a simpler firm that can operate faster, better serve our clients and unlock value for our shareholders," Citi Chief Executive Jane Fraser said.

Overall, Citi plans to trim 20,000 jobs over the medium term.

The move will put headcount at about 180,000 in the 2026 time period, down from 240,000 at the end of 2022 -- while also reflecting the expected spinoff of Citi's Mexico subsidiary, Banamex.

Shares of Citi rose 1.3 percent in afternoon trading, while JPMorgan was flat. Bank of America dropped 0.7 percent while Wells Fargo lost 3.2 percent.

M.AlAhmad--SF-PST