As Wall Street boom cools, bank executives start talking lending

Top U.S. bank executives are taking turns to moderate Wall Street earnings assumptions this year, while giving shareholders a reason to stick around: Lending is set to grow. Trading has cooled after a pandemic-driven surge, and spending to compensate rainmakers is rising, executives at JPMorgan Chase & Co. and Citigroup Inc. told analysts and investors on Friday. Either way, the economy is strong and rising interest rates will help improve advance yields, they and their counterparts at the Wells Fargo & Co summit said.

US banks are under increasing pressure to show how they will grow going forward after investors made it clear they were unhappy with fourth quarter results. Citigroup and JPMorgan both fell, with JPMorgan dropping as much as 6.4%, its biggest drop since June 2020. As of noon, only Wells Fargo had recouped its initial losses to trade up around 2.6%.

“We have tremendous firepower to grow, grow, make loans, extend term,” JPMorgan chief executive Jamie Dimon said on a conference call. He remained optimistic about U.S. economic growth, he said.

There were many pain points. They included steeper-than-expected declines in trading revenue, a business that Citigroup chief financial officer Mark Mason predicted would continue to “calm down” as calmer markets erase pandemic-induced volatility. 2020. The long-awaited rebound in borrowing also failed to materialize, with all three banks seeing tepid growth at best or declines in consumer lending at worst as government stimulus measures prevented borrowing.

To top it all off, there was the expense, as inflation drove up wages and banks faced other costs. They climbed 11% at JPMorgan, which also forecast an increase of 8.6% to 77 billion dollars for this year. Citing inflation and investments, the bank’s chief financial officer, Jeremy Barnum, said there were “a few years of under-target returns”.

“On the business side, we haven’t seen the growth materialize yet,” said Citigroup’s Mason. “And again, our clients have very, very strong balance sheets. There is a lot of liquidity in the market. Wells Fargo chief financial officer Mike Santomassimo said increased card spending hasn’t translated into loan growth.

But despite the lackluster results, executives remained bullish on a recovery in bank borrowing in 2022. The core part of their business – lending – should benefit from Federal Reserve interest rate hikes and a trickle-down from stimulus measures. relaunch.

Wells Fargo said it expects net interest income, a key metric for the lender that tracks what it earns in loans minus what it pays to depositors, could rise about 8 % in 2022. JPMorgan, the largest U.S. bank, also said it expects NII to exclude market activity at $50 billion for the full year, more than in 2021.

Barnum said the bank had started to see a recovery in loan growth, after reporting a 1% drop in consumer and business loans from a year earlier. The consumer is in “good shape,” Dimon said. “Despite omicron, despite supply chains, 2021 was one of the best growth years ever,” he said.

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