Finance News

Major US banks are poised to see a boost in profits

In recent years, major banks like JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo have increased loan rates in tandem with the Fed's interest rate hikes, without passing on the full increase to depositors.

Initially, these banks had cautioned investors that profits from lending, known as net interest income, would decline in 2024 due to expectations of multiple rate cuts and savers shifting funds to higher-yield deposit accounts, affecting banks' profit margins.

However, the outlook for major banks has brightened, with the market now expecting the Fed to implement only two to three rate cuts in 2024, down from the previously anticipated six cuts. Analysts suggest that some banks may revise their guidance upwards as they begin reporting first-quarter results this week.

"Fewer rate cuts mean we expect that banks are likely to have a better outlook for net interest income for full-year 2024 than they did in January," said Betsy Graseck, an analyst at Morgan Stanley.

JPMorgan, Citigroup, and Wells Fargo are set to report earnings on April 12, followed by Goldman Sachs on April 15, and Morgan Stanley and Bank of America the next day.

Profits may be impacted by additional fees as part of the Federal Deposit Insurance Corporation's plan to recover losses associated with rescuing Silicon Valley Bank and Signature Bank last year, most of which the groups had already paid in 2023.

With rising borrowing costs, banks have been steadily increasing their reserves to cover potential losses. Analysts anticipate that charge-offs — losses on loans marked as unrecoverable — in the first quarter will collectively rise to about $6.7 billion at JPMorgan, Bank of America, Citigroup, and Wells Fargo, up from $3.85 billion a year earlier. Nonetheless, analysts consider the increase in losses manageable.

Date: 09.04.2024 [ID: 391]

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