Major US banks show profit boost, but cautious on outlook, consumer health

NEW YORK (Reuters): Major US banks on Friday reported rising profits from higher interest rates on loans but warned the economy was slowing as customers depleted their savings.

JPMorgan’s (JPM.N) profit jumped 35% in the year-ago quarter, while Wells Fargo (WFC.N) profit surged 60%. Citigroup reported a more modest year-on-year 2% gain.

The banks benefited from higher interest rates, which have bolstered banks’ net interest income (NII), or the difference between what they earn on loans and pay out on deposits.

JPMorgan and Wells Fargo, the first- and fourth-largest US lenders, respectively, also increased their outlook for NII.

Shares of JPMorgan rose 2.3% at the open while Wells Fargo, which beat analysts’ estimates, was up 2.8% and Citi was 3% higher. PNC, however, fell 1.8%. The KBW index of bank shares (.BKX), which includes regional lenders, was up 1.1%.

The banks, however, sounded cautious about the economic outlook.

“Currently, US consumers and businesses generally remain healthy, although consumers are spending down their excess cash buffers,” said Jamie Dimon, JPMorgan Chairman and CEO.

Wells Fargo said it was seeing charge-offs, or loans written off, increasing in its credit card portfolio.

“While the economy has continued to be resilient, we are seeing the impact of the slowing economy with loan balances declining and charge-offs continuing to deteriorate modestly,” said Wells Fargo CEO Charlie Scharf.

Citi CEO Jane Fraser said she was seeing a continued deceleration in spending, indicating “an increasingly cautious consumer.”

Regional lender PNC Financial Services (PNC.N), meanwhile, reported higher consumer loan delinquencies.

Dimon said that the results benefited from “over-earning” on net interest income although that would normalize over time. JPMorgan’s NII rose 30% to $22.9 billion while Wells saw an 8% climb to $13.1 billion.

PNC profit was down 4.26% year-on-year to $1.57 billion while its NII declined 2%. The bank said that higher yields on interest-earning assets were more than offset by increased funding costs.

JPM and Wells reported a decline in average deposits.