Monday, January 24, 2022

Investors cautious on bank’s growth despite officials’ optimism

WASHINGTON, Jan 14 (Reuters) – While large US bank owners were optimistic on the economic outlook on Friday, with investors skeptical of the sector’s growth outlook, pointing to an uptick in some lending businesses and a boom in consumer spending. Was.

JPMorgan Chase & Company (JPM.N), Citigroup Inc. (CN) and Wells Fargo & Co., the US economy giants, reported combined profits of $19 billion for the fourth quarter, each comfortably beating analysts’ estimates. racked up. read more

However, analysts noted that Beats was helped by reserve releases and other outright commodities and that underlying performance was less compelling.

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Bank shares (.SPXBK) were down 2.1% across the board amid concerns over declining business revenue and loan growth, with only Wells Fargo continuing the trend in the top six.

“Investors are concerned about where growth is going to come from,” said David Hendler, analyst at Viola Risk Advisors Bank. “Not much sunshine in the coming quarters.”

Bank officials said the US economy is still on a healthy trajectory despite headwinds including an Omicron infection wave, 7% inflation, and supply chain bottlenecks.

Credit growth, a key metric watched by analysts, was mixed, with consumer lending and spending increasing, he pointed out.

“The consumer is very strong,” JPMorgan CEO Jamie Dimon told analysts. “Despite…Omicron, regardless of supply chains, 2021 was one of the best growth years ever,” he said.

The average loan at JPMorgan, the nation’s largest lender, grew 6% year-over-year, while combined debit and credit card spending rose 26%. At Wells Fargo, loans were down 3% year-over-year but grew 5% during the second half of 2021, fueled by its consumer and commercial portfolio.

Chief financial officer Mark Mason said overall lending at Citigroup was flat, partly because corporations are still flush with cash and have other financing options, but debt balances on Citigroup-branded cards in North America were 3% from a year ago. % was up and spending was 24% higher.

People walk under the Citibank branch logo on July 17, 2009 in the Financial District of San Francisco, California. Reuters/Robert Galbraith/File photo

The country’s other leading consumer lender Bank of America Corp (BAC.N) reported earnings on Wednesday.

Jason Ware, chief investment officer at Albion Financial Group, said: “The three major banks we’re reporting today are not only seeing a good environment for credit growth in the fourth quarter, but the management teams are optimistic that this Will continue till 2022.” Who owns shares of JP Morgan.

Still, investors worry that rising inflation could hurt consumer spending, while credit growth may not be strong enough to outpace deposit growth, meaning banks may see a steady rise as benchmark rates rise. The yield curve may not fully benefit.

“It gives the impression that the economy is not as strong as we thought,” said Keith Buchanan, portfolio manager for Global in Atlanta.

expenses, business

Officials said inflationary pressures also put pressure on expenses as banks are facing stiff recruitment competition and are being forced to pay more to recruit and hire talent. read more

“Hiring has been very competitive throughout the business,” said Citigroup’s Mason. “We’ve seen some pressure on what it takes to attract talent.”

JPMorgan’s and Citigroup’s Wall Street businesses performed as expected, with both posting major declines in trading. It was cushioned by another stellar quarter for deals.

Goldman Sachs Group Inc. (GS.N) and Morgan Stanley (MS.N), other Wall Street trading giants, will report next week, providing further clues about what the trading environment may look like for the rest of the year.

Analysts expect further normalization as the Fed slows down and eventually stops buying its assets altogether.

“You wouldn’t have a fixed income business boom in a low-rates environment, with corporations rushing to refinance at lower rates,” Hendler said.

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Additional reporting by Matt Scuffum, Megan Davis, Elizabeth Dilts, David Henry, Noor Zainab Hussain, Niket Nishant and Sinead Kairav ​​Editing by Nick Ziminsky

Our Standards: Thomson Reuters Trust Principles.

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