US banks post strong profits, but inflation and rate risks cloud outlook

Wall Street’s biggest banks reported higher third-quarter profits on Tuesday, supported by resilient consumer spending and strong business investment in artificial intelligence. However, executives warned that persistent inflation and elevated interest rates could eventually strain household finances and slow the economy, Reuters reported.

JPMorgan Chase earned $15.3 billion, or $5.57 a share, compared with $14.4 billion, or $5.07 a share, a year earlier. Earnings fell short of analysts’ estimate of $5.93 a share, marking the bank’s first miss in nearly three years.

Weakness in JPMorgan’s investment-banking division weighed on the results, as fixed-income trading activity slowed from both the previous quarter and the same period last year.


“The US economy continued to be fueled by strong business investment and ongoing consumer spending,” CEO Jamie Dimon was quoted as saying by Reuters. He also warned that large fiscal deficits, stubborn inflation, elevated asset prices, rising interest rates and geopolitical risks continued to create uncertainty.

The largest US banks traditionally open the quarterly earnings season, which is especially important for markets this time around. Strong corporate profits have helped push the S&P 500 to record highs.

Analysts expect S&P 500 companies to deliver earnings-per-share growth of nearly 30% from a year earlier, according to FactSet. If that estimate proves accurate, it would be the third consecutive quarter in which earnings growth exceeded 25%.

Goldman Sachs reported a third-quarter profit of $5.29 billion, or $17.01 a share, up from $4.1 billion, or $12.25 a share, a year earlier. A surge in stock-trading revenue drove the increase, although bond-trading activity weakened during the quarter.

Bond markets experienced sharp volatility over the summer as investors became increasingly concerned about government spending and inflation. Yields on benchmark 10-year and 30-year Treasury securities climbed to their highest levels in years.

Rising diesel, technology and food prices also contributed to the Federal Reserve’s decision to raise interest rates last month, despite pressure from the White House to keep borrowing costs unchanged.

Citigroup’s third-quarter profit rose 40% from a year earlier and exceeded Wall Street expectations. The bank recorded higher revenue from investment banking and wealth management, while profit in its credit-card business remained flat.

Wells Fargo reported a profit of $5.95 billion, or $1.87 a share, also beating analysts’ forecasts. Its earnings have improved steadily since federal regulators lifted the asset cap imposed after the bank’s sales-practices scandal nearly a decade ago.

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)