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Higher profits at four of the biggest US banks offered fresh signs of economic resilience, as consumers continued repaying their debts and businesses kept investing heavily in AI.
But even as JPMorgan Chase, Citigroup, Wells Fargo and Goldman Sachs reported higher profits than a year ago, they warned about the long-term impact of higher interest rates and the pressure rising prices could put on consumers if inflation is not brought under control.
JPMorgan Chase, the largest US bank by assets, posted a $15.3 billion profit in the third quarter, or $5.57 a share, up from $14.4 billion, or $5.07 a share, in the same period a year earlier. The results missed analysts' expectations, with Wall Street expecting the bank to earn $5.93 a share.
It was a rare earnings miss for JPMorgan and its CEO, Jamie Dimon. The last time the bank missed analysts' expectations was nearly three years ago. The bank reported $658 million in investment securities losses and a 12% rise in expenses. Fixed income markets revenue fell 4% from a year earlier, although overall markets revenue rose 15%.
"The US economy continued to be fueled by strong business investment and ongoing consumer spending," Dimon said in a statement. "However, large fiscal deficits, sticky inflation, elevated asset prices, rising interest rates and geopolitical conditions continue to shift under the surface."
The big banks typically open the quarterly earnings season, and this is a key one for the stock market given that strong corporate profits have helped push the S&P 500 to record levels.
Analysts expect companies in the S&P 500 to deliver overall growth of nearly 30% in earnings per share from a year earlier, according to data provider FactSet. If they're correct, it would be the third consecutive quarter of growth above 25%.
Goldman Sachs, whose third-quarter profits rose sharply as revenue from its equities business jumped 72% from a year earlier, also reported that its fixed income, currencies and commodities revenue fell 24% from the second quarter. The bank posted a profit of $5.29 billion, or $17.01 a share, compared with $4.1 billion, or $12.25 a share, a year earlier.
The bond market saw significant volatility this summer, as investors became increasingly worried about government spending and inflation. Yields on 10-year and 30-year US Treasury bonds rose to levels not seen in years. Higher diesel, technology and food prices gave the Federal Reserve reason to raise interest rates last month, despite pressure from the White House against a rise.
Citigroup said its third-quarter profits jumped 40% from a year ago, beating Wall Street expectations. The bank posted higher revenue from investment banking and wealth management, while profits in its credit card division were flat.
Wells Fargo posted a profit of $5.95 billion, or $1.87 a share, beating Wall Street forecasts. The San Francisco-based bank has seen its profits climb steadily in recent quarters after federal bank regulators removed the asset cap imposed following its sales practices scandal nearly a decade ago.