The U.S. consumer continues to show signs of health, signaling a soft landing for the economy, as the U.S.’s biggest banks shared a glimpse into their collective crystal ball on Friday.
“The way we see it, the consumer is fine,” said JPMorgan Chase & Co. Financial Chief Jeremy Barnum. “I think it’s uncontroversial that the economic outlook has evolved to include a significantly higher probability of a soft landing. That’s, I think, the consensus at this point.”
JPMorgan Chase
JPM,
weighed in with its outlook as part of its stronger-than-expected earnings update Friday, citing a “resilient” economy.
Bank of America Corp. and Wells Fargo & Co. also issued bullish comments, but Wells Fargo signaled more uncertainty over its 2024 outlook.
While banks remained optimistic about avoiding a recession, they also took a cautious stand on their balance sheets by boosting their reserves and taking other measures. An economic slowdown remains on their radar, even absent a more severe drop.
Banks have described recent moves by consumers to spend down their deposits as part of a “normalization” of the economy after the infusion of trillions of dollars in economic stimulus and the COVID-19 pandemic.
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Barnum said that while consumers may have “less comfortable” cash buffers in the form of savings and other resources, the December U.S. jobs report signaled continued health in the economy.
“A very strong labor market means, all else equal, strong consumer credit,” Barnum said. “So that’s how we see the world.”
Bank of America Corp.
BAC,
Chief Executive Brian Moynihan said consumer deposit balances remain 30% higher than before the pandemic, although they’re declining modestly. The bank also expects a soft landing to the economy.
“Their balance sheets are generally in good shape and while impacted by higher [interest] rates, many [consumers] have fixed-rate mortgages and remain employed, so they’ve shown great resilience,” Moynihan said.
Also read: Bank of America’s stock slides 2% as earnings almost halve from a year ago
Overall, consumers are spending more on services and at restaurants and less on goods and at retail stores, he said.
Wells Fargo & Co.
WFC,
said credit-card outlays rose 15% in 2023.
“The financial health of our consumers remains strong,” said Wells Fargo CEO Charlie Scharf.
While wage growth has “more than offset” increased spending, “there are cohorts of customers that are more stressed,” he said.
Looking ahead, Wells Fargo said factors that could impede its results include the path of interest rates, the shape of the yield curve in the Treasury market, quantitative tightening, fiscal deficits, consumer behavior and competitor behavior.
The bank said it expects its net interest income — the money it makes from loans after it pays out interest for deposits — to come down in 2024, but it did not provide a specific projection.
Also read: Wells Fargo set aside a lot more money for potential loan losses, stock falls
Greg Robb contributed.
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