Bank earnings: Americans keep spending despite higher costs
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American consumers remain resilient despite higher interest rates and energy costs, according to earnings reports from three of the nation's biggest banks Tuesday.
Why it matters: The AI boom is getting a lot of credit for propping up the economy, but don't forget about the role of consumers.
Driving the news: At JPMorgan Chase, credit and debit card sales volume was up 10% compared with a year earlier.
- At Wells Fargo, debit card spending increased 8% year over year, up from from 5% growth a year earlier. Credit card spending jumped 12%.
- At Citigroup, general-purpose card spending jumped 13%.
Zoom in: Chase added more than 650,000 net new checking accounts during the third quarter, while its average consumer and small-business deposits increased 4% and clients' investment assets rose 15%, boosted in part by rising market valuations.
- "We've seen kind of the reassertion of consumer deposit growth over the last couple of quarters," JPMorgan CFO Jeremy Barnum said on an earnings call.
And consumers are largely keeping up with their bills, despite concerns about mounting debt: JPMorgan's consumer card net charge-off rate declined to 2.91%, while Wells Fargo and Citi also reported improving consumer credit quality.
The big picture: "While much has been made of the AI boom, the consumer is still driving much of the growth," Citi CEO Jane Fraser said on the bank's earnings call. "The labor market is stable and companies remain active."
- Strong employment and wage growth have helped Americans absorb higher prices, according to Wells Fargo CFO Mike Santomassimo.
Yes, but: Bank executives warned that persistently high interest rates could eventually take a toll on consumers, particularly if the labor market weakens.
- The housing market is already feeling the squeeze. Mortgage rates recently climbed above 7%, threatening to further chill an already sluggish market.
The bottom line: Consumer sentiment may be at a 12-year low, but Americans are still spending — and, for now, keeping up with their bills.
