JPMorgan Chase & Co. said its fourth-quarter profits rose 6% from a year ago. As well as, Bank of America’s fourth-quarter profits rose slightly from a year ago, as higher credit costs and potentially bad loans more than offset the bank’s sharp rise in interest revenue. But Wells Fargo’s profit for the fourth quarter came in ahead of Wall Street’s targets but were about half of what it earned last year. The Associated Press has the story:
US banks Q4: JPMorgan, BOA rise, Wells Fargo falls
Newslooks- NEW YORK (AP)
JPMorgan 4Q profits rise, helped by higher interest rates.
JPMorgan Chase & Co. said its fourth-quarter profits rose 6% from a year ago, as higher interest rates helped the bank make up for a slowdown in deal-making in its investment bank. The bank also set aside more than $2 billion to cover potential bad loans and charge-offs in preparation for a possible recession.
The New York-based bank said Friday that it earned $11.0 billion last quarter, up from $10.4 billion in the same period a year earlier. On a per-share basis, JPMorgan said it earned a profit of $3.57 a share compared to $3.33 a share in 2021, much better than the $3.08 a share that analysts were expecting.
The biggest driver of JPMorgan’s profits this quarter was higher interest rates. The bank, like its competition, has been helped considerably by the Federal Reserve hiking rates aggressively to combat inflation as banks can charge more for loans.
JPMorgan’s net interest income was $20.3 billion, up 48% from a year earlier.
But at the same time that the Fed’s rate hikes have helped JPMorgan’s bottom line, the chance that the Fed will push the U.S. economy into recession has increased as well. JPMorgan set aside $1.4 billion to cover potentially bad loans, and incurred roughly $900 million in charge-offs. The bank said it needed to set aside more money to cover bad loans due to “a modest deterioration” in the firm’s economic outlook, which now calls for a “mild” recession.
However JPMorgan as well as other banks remains upbeat about the health of the U.S. consumer. JPMorgan saw a double-digit rise in credit card spending from a year earlier.
“The U.S. economy currently remains strong with consumers still spending excess cash and businesses healthy,” said Jamie Dimon, chairman and CEO of JPMorgan Chase, in a statement. “However, we still do not know the ultimate effect of the headwinds coming from geopolitical tensions including the war in Ukraine, the vulnerable state of energy and food supplies, persistent inflation that is eroding purchasing power and has pushed interest rates higher, and the unprecedented quantitative tightening.”
Last year’s market decline hit JPMorgan’s investment bank particularly hard in the last quarter. The bank reported a 27% decline in profits in its corporate and investment bank, mostly caused by a more than 50% drop in investment banking fee revenues. Deal-making last year slowed considerably, as many companies chose to hold off any big moves due to the Fed’s rate hikes.
For the full year, JPMorgan had revenue of $128.7 billion while profits fell 22% from 2021 to $37.7 billion. Most of the decline in JPMorgan’s full-year profits were tied to the higher credit costs the bank had to expense for the loan losses.
JPMorgan shares rose slightly in morning trading. The shares are up nearly 4% so far in 2023.
Bank of America profits rise; bank warns of slowing economy
Newslooks- NEW YORK (AP)
Bank of America’s fourth-quarter profits rose slightly from a year ago, as higher credit costs and potentially bad loans more than offset the bank’s sharp rise in interest revenue.
The Charlotte, North Carolina-based bank said Friday that it earned a profit of $7.13 billion, or 85 cents a share in the three months ended Dec. 31, compared to a profit of $7.01 billion, or 82 cents a share, in the same period a year earlier. The results were better than analysts’ forecast of a profit of roughly 77 cents per share, according to FactSet.
Like its major competitors, Bank of America saw a sharp rise in interest income, helped by the Federal Reserve aggressively raising interest rates last year to stop inflation. BofA’s interest revenue was roughly $3 billion higher than it was in 2021.
But also like JPMorgan Chase and others, BofA saw a slowdown in its investment banking business and had to set aside more money to cover potentially bad loans. The bank had $1.1 billion in credit reserves added this quarter; a year earlier, the bank released $500 million from that account.
Banks put money aside to cover potentially bad loans as their economists try to figure out where the U.S. and global economies are headed and use computer models to simulate how much in potential losses they may take in those scenarios. Most banks have predicted that there might be a recession this year as a result of the Fed’s rate hikes.
JPMorgan Chase told investors Friday that it is now predicting a “mild” recession as part of its outlook.
“We ended the year on a strong note growing earnings year over year in the (fourth) quarter in an increasingly slowing economic environment,” said Brian Moynihan, CEO and chairman of Bank of America, in a statement.
Wells Fargo 4Q profit falls by half but tops expectations
Newslooks- (AP)
Wells Fargo’s profit for the fourth quarter came in ahead of Wall Street’s targets but were about half of what it earned last year as the bank had to pay another $3.3 billion in fines and penalties to settle numerous scandals from recent years.
Wells earned $2.86 billion, or 67 cents per share, in the the last quarter of 2022. Analysts were expecting a profit of 60 cents per share. Last year, the bank earned $5.75 billion in the fourth quarter, or $1.38 per share.
Revenue of $19.66 billion fell short of Wall Street’s projections of $20 billion as well as the $20.86 billion logged in the same quarter last year.
Wells said the losses related to the regulatory matters were equal to about 70 cents per share.
The San Francisco-based bank also set aside an additional $397 million for its loan loss reserves in preparation for a potential economic downturn, which many economists are predicting as the Federal Reserve continues its aggressive rate hikes and monetary policy tightening to try to bring down inflation.
“We are planning for it to get worse than it’s been the past few quarters,” said Mike Santomassimo, Wells’ chief financial officer.
Shares in Well Fargo fell more than 4% in premarket trading.
Wells, which until recently was the biggest U.S. mortgage lender, said earlier this week it plans to drastically reduce its mortgage lending business. Wells said it is ending its correspondent lending business and reducing the size of its loan servicing portfolio to focus on its existing customers and expand its reach in underserved communities. Wells also introduced a handful of new credit card products last year and said it plans to roll out more in 2023.
Wells notched $13.4 billion in net interest income in the period, easily topping the $9.3 billion from the same period a year ago.
Wells, like other banks, has benefitted from the Federal Reserve’s aggressive interest rate hikes as the central bank tries to tamp down the highest inflation in four decades. Though there have been signs that inflation is easing, Fed officials have signaled that they may raise the central bank’s main borrowing rate another three-quarters of a point in 2023, which would bring it to a range of 5% to 5.25%.
Wells is still trying to exit the strict federal guidelines imposed in 2018 that sets its asset cap at just under $2 billion after a series of scandals, including the uncovering of millions of fake checking accounts its employees opened to meet sales quotas. That order was expected to last only a year or two, but additional scandals have surfaced and regulators have been skeptical about the bank’s efforts to clean up its act.
Just last month, Wells agreed to pay $3.7 billion to settle charges that it harmed customers by charging illegal fees and interest on auto loans and mortgages, as well as incorrectly applying overdraft fees against savings and checking accounts.
Wells was ordered to repay $2 billion to consumers by the Consumer Financial Protection Bureau, which also enacted a $1.7 billion penalty against the San Francisco bank. It’s the largest fine ever leveled against a bank by the CFPB and the largest yet against Wells.
U.S. regulators found that in 2016, Wells employees opened millions of accounts illegally in order to meet unrealistic sales goals. Since then, executives have repeatedly said Wells is cleaning up its act, only for the bank to be found in violation of other parts of consumer protection law, including in its auto and mortgage lending businesses.
