Higher interest rates are lifting the fortunes of the nation’s biggest banks. They aren’t doing the same for the banks’ customers.Their scale allows them to leverage those rates by charging more for loans while holding down how much more they pay for deposits when compared to smaller rivals.
Yet there were also clear signs that some of their borrowers are starting to struggle. JPMorgan, Citigroup, and Wells Fargo all increased the amount of loans they wrote off as losses. The combined charge-offs at those three banks totaled $3.98 billion, up 31% from the previous quarter and 105% from the same period a year ago.
Affluent customers, she added, are accounting for almost all of the spending growth and weakness is showing among those with lower credit scores. Citi expects its credit card losses to reach pre-COVID levels by the end of the year.Wells Fargo CEO Charlie Scharf said even as the economy remains resilient “we are seeing the impact of the slowing economy with loan balances declining and charge-offs continuing to deteriorate modestly.
The bank, he added, knows credit costs are going to go up. “They are trying to prepare the Street that you could see tougher times ahead.”), demonstrated the problems that smaller lenders have navigating this period of higher rates. Its profits and revenue fell from a year ago, as did its net interest income. It expects net interest income to fall again in the fourth quarter when compared to the third.
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