Wall Street after the publication of the profits of the Big Banks USA, i.e. the banks among the largest in the United States, primarily JP Morgan, the number one bank by asset value.
Investors are looking not only to the quarterly report, which was better than estimates, but to the caution shown by the giant’s CEO, Jamie Dimon.
While speaking of an economy, the American one, which “remains solid”, Dimon warned that “we do not yet know what will be the ultimate effects of the obstacles deriving from geopolitical tensions, which include the war in Ukraine, the vulnerability of of energy and food, persistent inflation which is eroding purchasing power and driving up interest rates, and the unprecedented Quantitative Tightening (by the Fed).
For Jamie Dimon, the baseline scenario is that of “a moderate recession”.
“We remain vigilant – added the CEO of JP Morgan – and we are ready for anything that should happen, so that we can serve our customers, and communities around the world“.
JP Morgan stock is under pressure, down 1% at around 4pm Italian time. Also down were the securities of the other banks that reported their quarterly earnings, namely Wells Fargo and Bank of America, which lost more than 4% and 3% respectively.
The Dow Jones is down 0.15%, the Nasdaq is down 0.40% and the S&P is down 0.46%.
In the aftermath of Inflation Day, it does not bode well for those who bet on the continuous slowdown in inflation made in the USA, and therefore on minor squeezes by Jerome Powell’s Fed (if not even rate cuts), the US import price index, released before the start of the trading day.
In December, US import prices rose by 0.4%, recovering after five consecutive months of declines, compared to the 0.9% drop expected by the economists consensus and after the 0.6% drop % of the previous month.
Economist Peter Schiff commented on Twitter:
“Instead of falling 0.9% as expected, December import prices rose 0.4%. Probably the result of US dollar weakness. E Continued weakness of the dollar throughout 2023 will only increase the upward pressure that inflation exerts on consumer prices. Recent improvements (i.e. declines) in the CPI are transient.”
Just yesterday, on Inflation Day, the CPI consumer price index was released.
The index rose 6.5% year-on-year, compared with +7.1% the previous month. The data was confirmed almost in line with expectations, given that analysts interviewed by Bloomberg had expected a headline CPI consumer price index up 6.6% on an annual basis.
Month-on-month, inflation fell by 0.1% month-on-month, more than the expected flat trend. Also slowing down on an annual basis was the growth of core inflation, i.e. inflation excluding the more volatile components represented by the prices of food and energy goods, which slowed down from 6% to 5.7%, as expected .
However, the core CPI rose on a monthly basis by 0.3%, as expected, and accelerating from +0.2% m/m in November. The reaction from Wall Street was nervous, however it closed in positive territory.
Today’s data risks fueling uncertainty about what Jerome Powell’s Fed will decide to do: even the prospect of lower rate hikes, therefore by 25 basis points, is not enough to allay the fears of investors, who for weeks they discount the possibility of a period of higher rates for a longer period of time than expected.
Watch out for rates on 10-year Treasuries are up to 3.452%. Rates on two-year Treasuries advance to 4.169%.
The roundup of profits of the Big Banks made in Us is the protagonist.
JP Morgan announced it finished the fourth quarter of full year 2022 (its fiscal third quarter) with EPS (earnings per share) of $3.57 compared to $3.33 earlier in the same period of 2021. FactSet consensus had forecast one eps at $3.08.
JP Morgan revenue rose to $34.547 billion from $29.257 billion in the same period a year earlier and against expectations of $34.353 billion.
The financial results of Bank of America were also disclosed, which ended the fourth quarter of 2022 with an EPS of 85 cents, better than the 77 cents expected. The U.S. bank’s revenue rose to $24.5 billion from $22.1 billion in the fourth quarter of 2021 and an estimated $24.2 billion. The Fed’s interest rate hike gave a boost to BofA’s profitability, causing its net interest margin to jump 29% year over year, to $14.7 billion. The NII increase helped offset the decline in investment banking fees, which was more than -50% to $1.1 billion, but in line with expectations.
Also the quarterly of Wells Fargo was the protagonist, which announced that it had reported an EPS in the fourth quarter of 2022 down by 51.4% y / y at 67 cents, better than estimates 60 cents. The US bank’s revenue fell 5.7% year over year to $19.66 billion, slightly below the $19.9 billion expected by the consensus of analysts polled by FactSet.
The $3.7 billion maxi charge linked to the plea agreement that Wells Fargo reached with the federal authorities of the United States, to close the lawsuit that saw the giant specialized in the mortgage market protagonist of the ghost current account scandal, weighed heavily (involving more than 16 million people).
Finally, Citigroup announced that it finished the fourth quarter of 2022 with net income of $2.5 billion, or $1.16 per share. The bank reported revenues of $18 billion, ahead of Refinitiv’s expectations of $17.9 billion. The good news is that the markets division reported the best fourth quarter in the bank’s recent history.