Bank Earnings to Offer Insight Into Digital Pivots and Loan Charge-Offs

Every three months, like clockwork, the earnings roll in.

And every three months, the big banks usher in the “official” start of earnings season.

Will it all begin with a bang or whimper? Friday will tell as J.P. Morgan, Wells Fargo and Bank of America weigh in with the initial salvo of statistics on everything from digital banking to loan performance to consumer spending across debit and credit cards.

Consumer Spending in Focus

J.P. Morgan, the behemoth that has roughly 18% of the industry’s revenues under its belt, notched 8% in debit and credit card spending growth in its third quarter (outpacing Bank of America’s 3% growth). But there’s evidence that consumers are drawing down on savings to afford the demands of daily financial life. The company also disclosed that average deposits were down 8% to $1.1 trillion.

The fourth quarter includes the holiday shopping season, so we’ll get a sense of spending resilience. As PYMNTS Intelligence data noted in the most recent run-up into the holiday shopping season, as many as 4 in 10 consumers said they planned to use savings to cover at least some of their gifting expenses. As many as 43% of consumers living paycheck to paycheck and struggling to pay bills planned to use credit for holiday spending, and we’ll see how much of the debt burden can be comfortably shouldered in the beginning of 2024.

J.P. Morgan management noted on the most recent conference call that spending has eclipsed pre-pandemic levels. At the same time, however, the company reported that card net charge-off rates should be around 2.5%, up from 1.4% seen last year.

Wells Fargo’s net charge-off rates were 0.9% of total loans in Q3, up from 0.5% in the year prior.

For the biggest banks, so-called bad debt — from borrowers who are at least 90 days delinquent — is expected to have climbed to $24.4 billion for the four biggest U.S. banks.

Banking and Paying — and P2P — Online

Mobile banking remains firmly entrenched, as J.P. Morgan reported active mobile customers were up 9% year over year to 53.2 million in Q3.

Investors will be parsing the data to see how transaction growth, done digitally, may be faring. Bank of America reported in its own Q3 earnings details that digital adoption, overall, has touched 74% of the bank’s consumers, representing 46 million digital active users.

Zelle transactions gained 27% year over year to 323 million. And as those transactions go online, checks are left a bit by the wayside, as Zelle is outstripping checks written by Bank of America clients by twice as much.

CashPro app sign-ins with business clients — through which firms manage payments, liquidity and receipts — were up 40%.

Wells Fargo disclosed in its Q3 earnings that its active digital customers were up nearly 3% to 34.6 million, while its branch count declined by more than 5% to 4,355.