Last week, the largest US banks reported their quarterly operating results, which showed that US consumers continued to spend despite rising energy prices, while balance sheets were further supported by strong investment banking and securities trading segments.
The increase in the price of fuel, which makes up a small part of personal consumption, did not have a significant impact on purchasing power, bank representatives said. Moreover, BoA and JPMorgan reported a lower proportion of credit card users who are late on their payments.
The significance of the problem of private loans, which attracted the attention of investors since the beginning of the year, was mostly mitigated by the banks considering the relative size of the entire industry. Thus, JPMorgan reported exposure of about $50 billion, Wells Fargo $36 billion, and Citi about $22 billion compared to the thousands of billions in other loans and deposits sitting on banks’ balance sheets.
Bank managements have focused more on the general credit cycle, especially when you consider how long it has been since the last downturn in economic activity, or recession, not counting the pandemic.
High market volatility brought record revenues from the securities trading segment. The six largest banks recorded a 17 percent growth in trading income to around $45 billion, while the S&P 500 posted its worst quarterly results in nearly four years, SEEbiz reports.
Apart from the trading segment, the banks also recorded excellent results in the investment banking sector, and expectations for the rest of the year are no worse. Several mega initial share offerings are expected this year, and bank management sees a slowdown in the mergers and acquisitions segment only in the event of a major decline in economic activity.
The ETF on the index of the largest American banks (Invesco KBW Bank) rose last session by 2.4 percent, while since the beginning of the year it is in a slightly larger plus of three percent.
