The reporting season has begun with the publication of the quarterly figures of the four largest US banks. The financial institutions have recently suffered primarily from the high payments to the deposit protection fund.
The reporting season has begun in the USA. It started in the afternoon before Wall Street opened with the four largest US banks: JPMorgan, Wells Fargo, Bank of America and Citigroup were the first to open their books.
JP Morgan makes record profits
The largest US bank, JP Morgan, was able to make a record profit for the full year of 2023 thanks to the high interest rates in the USA. In 2023, profits rose by more than 30 percent to $49.6 billion compared to the previous year – also because JP Morgan was able to charge significantly higher interest rates for loans. Net interest income alone – the difference between interest earned and interest paid – reached a peak of around $89 billion. For 2024, bank boss Jamie Dimon expects a further increase to around $90 billion.
However, the high payments to the US deposit insurance fund clouded the picture somewhat and caused profits to fall in the fourth quarter. From October to December, the net profit fell to 9.31 (previous year: 11.01) billion dollars, the financial institution announced today before the start of the stock exchange in the USA. Revenues rose by twelve percent to $38.57 billion.
JPMorgan and other major US banks have to bear the lion’s share of payments to the deposit insurance fund amounting to around $16 billion. They were due after the difficulties of Silicon Valley Bank and Signature Bank. In the fourth quarter of 2023 alone, JP Morgan paid around three billion dollars to the security fund.
Bank of America profits shrunk
Billions of dollars in payments to the deposit protection fund also significantly reduced Bank of America’s profits in the fourth quarter: more than two billion dollars flowed there. This is one of the reasons why the second largest banking group in the USA only achieved a net profit of $3.1 billion in the final quarter of last year, as the financial institution announced today.
From CEO Brian Moynihan’s point of view, the financial group still performed well in the final months of last year: “We presented solid results for the fourth quarter and the full year, as all of our businesses achieved strong organic growth.”
However, Bank of America was unable to benefit from the higher loan interest rates, which primarily improved JP Morgan’s results: net interest income fell by five percent to $13.9 billion. There were also additional charges of $1.6 billion related to the expiration of a Bloomberg interest rate benchmark used in some loan agreements.
Citigroup wants to cut thousands of jobs
Payments to the US deposit insurance fund are putting such a strain on the third-largest US bank that it posted its worst quarterly results in 15 years. Citigroup reported a quarterly loss of $1.8 billion before the U.S. market opened today after restructuring costs, the withdrawal from Russia and the devaluation of the Argentine peso weighed on profits.
Citigroup CEO Jane Fraser called the results “very disappointing” but said she expects this year to be a turning point: “We have made significant progress in simplifying Citi and executing our strategy in 2023,” she said in a statement. Part of this is also that 20,000 jobs will be cut at Citigroup in the medium term.
“Citigroup’s earnings looked terrible with a large loss of $1.8 billion, but the bank’s underlying business was resilient. The loss was mainly due to exceptional items as well as a sharp increase in loan loss provisions,” Octavio assessed Marenzi, CEO of the management consultancy Opimas LLC, the quarterly figures.
Wells Fargo can increase profits
The profit of the fourth largest US bank Wells Fargo rose by nine percent in the fourth quarter of 2023 despite the burden of payments into the deposit protection fund. Wells reported net income of $3.45 billion for the final three months of last year, compared to $3.16 billion in the same period last year.
The bank – like JP Morgan – was able to benefit from the higher interest rates. However, Chief Executive Officer Charlie Scharf noted: “We are monitoring lending closely, and while we see a slight deterioration, it remains in line with our expectations.” However, he also emphasized: “Our business performance remains sensitive to interest rates and the health of the US economy.”