Big Bank Earnings Show Consumer Spending’s Continued Resilience

As earnings season gets underway, a trio of big bank earnings points to variations on some themes: Consumers are still spending, loan losses seem manageable … and technology underpins it all (and the banks will have to keep spending on tech to keep apace with the digital age).

To that end, drilling down into the earnings reports, we see continued reversals of loan loss reserves, growth in card and debit spend, and growth in mobile banking users.

The Consumer (Spending) Rises While Loan Loss Reserves Decline  

For J.P. Morgan, as we noted in the wake of that firm’s report, debit and credit sales volume was $376.2 billion in the most recent period, up 26% year on year. Credit card sales volumes were up 29% from last year, to a recent $254.1 billion.

Read Also: JPMorgan Active Mobile Customers Hit 59M, Tech Investments Top $12B

CEO Jamie Dimon said in the release that “credit continues to be healthy with exceptionally low net charge-offs, and we remain optimistic on U.S. economic growth.” Total net charge-offs in the most recent quarter stood at $515 million, down from $817 million a year ago; the total allowance for loan losses shrank to $12.3 billion in the fourth quarter from more than $22 billion a year ago.

Wells Fargo’s own earnings supplementals show that its allowance for credit losses for loans is $13.8 billion, down $5.9 billion from the fourth quarter of 2020 and down $917 million from the third quarter of this year. Wells’ credit card-related revenues were up by three percent in the most recent quarter, on higher point of sales volume.  Debit card volumes were $122.4 billion in the quarter, up 16% year on year.  Credit card POS volume in the period was up more than 28% to $29.4 billion.

Read Also: Wells Fargo Tops Forecasts with $5.8B Q4 Profits

Wells’ management noted on the conference call that credit quality improved significantly as the economy improved and customers had high levels of liquidity.

CEO Charlie Scharf said on the call that “holiday sales were strong, with spending up 31% the three weeks leading up to Thanksgiving, and that momentum continued post-Thanksgiving. All spending categories were up in the fourth quarter compared to a year ago, with the largest increases in travel, fuel, entertainment and dining.”

Citi’s results, alongside its earnings announcement, show that card spend in North America was $115 billion in the most recent quarter, up 24% year on year, while average loans on those cards gained three percent over the corresponding periods to $85 billion; international card spend volume was up 11% to $28 billion.

Net credit losses on its global consumer banking division stood at $805 million, down from $1.2 billion in the year ago period.  Management said on the call that within the U.S., strong purchase sales continued to be offset by elevated payment rates — but, as CEO Jane Fraser noted, “we did see loans increase in branded cards this quarter. Deposits and AUM continued to grow, with digital deposits up nearly 20% for the full year.”

The Digital Shift  

As for the great digital shift, we’re turning to our devices, more than ever, to get everyday banking done.

For J.P. Morgan, total active digital customers in the quarter stood at 58.9 million, gaining 6% year over year, and 2% sequentially. The active mobile customers outpaced those rates, growing to 45.5 million, up 11% from last year’s fourth quarter.

Wells Fargo said in its supplemental materials that digital (online and mobile) customers were 33 million, up three percent from last year.  Mobile active customers in the fourth quarter stood at 27.3 million, up five percent from last year.  Management said on the call that even with existing capabilities, in the fourth quarter, customers logged in 1.6 billion times using a mobile device, up 7% year over year.

Citigroup said that its active digital users surged six percent year over year to 37 million in the latest quarter; active mobile users gained 11% to 28 million.

And in quantifying the tech investments needed to get toward even more digital adoption, for consumer and enterprise clients alike, J.P. Morgan management said on the conference call with analysts that investments on technology have been topping $12 billion on an annual basis, with half of that tied to regulatory-related and modernization effort.