Investors Wary of Future Big Bank Profits

Big U.S. bank bosses have been optimistic about the economic outlook as of this past week, but investors have been skeptical of the growth outlook, Reuters reported Friday (Jan. 14).

J.P. Morgan Chase, Citigroup and Wells Fargo have all reported combined profits of $19 billion in the fourth quarter, which have each seen a defeating of analyst estimates.

That said, analysts have noted that the beats were assisted by reserve releases along with other one-off items, and underlying performances were not as compelling.

Across the board, bank shares were down 2.1% — only Wells Fargo did better among the top six. Because of this, there were worries over a fall in trading revenues and loan growth.

“Investors are concerned about where growth is going to come from,” Viola Risk Advisors bank analyst David Hendler told Reuters. “There doesn’t seem to be much sizzle in the forward quarters.”

Average loans at J.P. Morgan rose 6% year over year. At Wells Fargo, loans were down 3% year over year, but they grew 5% during the second half of 2021.

Meanwhile, Citigroup saw flat lending, mostly because corporations have continued to have cash on hand and they have other financing solutions. Overall, the banks appear optimistic about 2022.

“The consumer is very strong,” J.P. Morgan CEO Jamie Dimon told analysts. “Despite … omicron, in spite of supply chains, 2021 was one of the best growth years ever.”

Jason Ware, chief investment officer for Albion Financial Group, which holds J.P. Morgan shares, said there’s a good environment for loan growth in Q3 and also optimism that it could keep going.

However, PYMNTS recently reported that not everyone is so optimistic. On Jan. 14, profits were down at J.P. Morgan by 14% and were down 26% at Citigroup.

Read more: Big Pandemic Profits Could Be Over For Big Banks

This could be an end to the big growth banks have been seeing since COVID, which was helped by robust dealmaking, a volatile market and a housing sector that made sure mortgages were more profitable than ever.

Despite the fact that several doomsday scenarios did not materialize, J.P. Morgan Chief Financial Officer Jeremy Barnum said the headwinds “likely exceed the tailwinds” and that it didn’t expect to hit long-term profitability goals within the next year or two.