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Bank Earnings May Highlight Volatile Consumer Spending

Friday marks the beginning of earnings season.

And, as is always the case, every three months, the big banks will give a glimpse into the state of consumer spending and into a continuance of the great digital shift that has helped power banking across online and in-person channels.

On Friday (April 12), we’ll see reports from the likes of JPMorganWells Fargo and Citi. And next week, Bank of America will weigh in.

Consumer Spending in Focus 

The December quarter saw a surge in debit and credit card spending, and the holiday shopping season gave some tailwind to consumers’ propensity to wield their cards at the register or online as they hit “buy.”

JPMorgan, for example, reported in its year-end results that debit and credit spending gained 7% to $441 billion, while card loans gained 14% to $202 billion.

Wells Fargo, for its part, said that credit card spending was up 15% for the year, while debit card spending rose 1%. 

Citi’s results showed that card-based loans were up 13% year on year, and card spending volumes gained 5%.

Bank of America said, as we noted in our earnings coverage, that P2P volumes through Zelle gained 25% to $101 billion. Combined credit and debit spend was up 3% year on year to $228 billion.

Thus far, credit metrics and delinquencies are trending towards normalization, and pre-pandemic levels. 

JPMorgan’s supplementals revealed that the card-related net charge-off rate stood at 2.8%, up from 1.6% last year, and management predicted that net charge-offs this year should be below 3.5%.

Digital Momentum, Unabated?

The pivot toward doing more banking online will likely be highlighted during earnings calls and in earnings materials.

JPMorgan’s active mobile customers were up 8% year on year to 53.8 million in the latest quarter.

Wells Fargo CEO Charles Scharf said his bank added 1.6 million mobile customers during the year and saw 11% more mobile logins.

Bank of America said that active digital users topped more than 46 million, up 4.5% from a year ago. 

Digital “sales” as a percent of total sales came in at 49%, per the company data. Active users and interactions with Erica, Bank of America’ virtual assistant, were up a respective 12.1% to 18.5 million and 16% to 170 million.

It remains to be seen just how and where consumers have been spending their time and money. 

PYMNTS Intelligence data, which examines the paycheck-to-paycheck economy, has shown that about 60% of consumers just about make ends meet — or struggle to do so. Nearly half of consumers earning north of $100,000 annually say they are living paycheck to paycheck.   

The data shows that consumers across income brackets say housing costs (29%), grocery and household expenses (20%) and regular and personal outlays (21%) absorb the lion’s share of their monthly earnings — which may leave little left over to use for discretionary spending.

 As JPMorgan CFO Jeremy Barnum said on the most recent earnings conference call with analysts, “consumers have been spending more than they’re taking in,” adding that it remains to be seen “how that spending behavior adjusts as we go into the new year in a world where their cash buffers are less comfortable than they were.”