A recurring topic of big bank revenue is the slowdown in loan growth – the business sector considered largely as the "bread and butter" of the banking sector. The sluggish pace of lending is part of a context of declining consumer confidence and declining manufacturing activity.
Year-over-year loan portfolios (net of provisions for losses) increased 6% at JPMorgan Chase (JPM), 3% at Citigroup (C) and 1.2% at Bank of America (BAC). Wells Fargo (WFC), who said he would continue to face a ceiling of assets from the Federal Reserve until the end of 2019, has actually seen his loans drop by 0, 2% from one year to the next.
Dick Bove, chief strategist at Rafferty Holdings, told Yahoo Finance that personal and business lending "has slowed considerably," pointing out that the numbers are relatively small compared to the 8% growth in lending by banks in early 2018.
"There has been a significant reduction in loan health," said Bove.
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But the banks themselves have not sounded the alarm. Jamie Dimon, CEO of JPMorgan Chase, told the country's largest bank, "We have no problem seeing the volume of loans crumble," adding that he gave priority to the company's banking relationships. in relation to the number of new loans.
"There are reasons why we stay in a company knowing that there will be a cycle and that we will not be children in this cycle," Dimon said during a conference call on Tuesday.
Marianne Lake, CFO of JPMorgan Chase, said she saw "a story of two cities" where some loan pockets are healthy but others are tightening. She spoke of the difficult conditions of home equity and commercial real estate, but said that JPMorgan Chase was able to reduce slightly better than the standard growth of commercial and industrial lending.
Rising interest rates hurt the mortgage markets and the Fed said credit officers had tightened their standards for construction loans for commercial real estate.
Citigroup's results also revealed barriers to consumer credit. The company reported a "brake" on US mortgage revenue and its branded credit card portfolio, a commodity for the bank.
At the Bank of America, CEO Brian Moynihan generally predicted that his bank's total loan growth would be "less than 10 percent," adding that the performance of their investment banking business was "less than 10 percent". Activity in 2019 could vary "depending on economic growth".
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JPMorgan Chase, Bank of America and Citigroup were able to improve their net interest margins on an annual and quarterly basis. Wells Fargo, faced with a Federal Reserve asset limitation, recorded a 2.94% NIM plateau between the third and fourth quarters of 2018. Source: Brian Cheung and David Foster / Yahoo Finance
Despite weak loan growth, banks are still improving the return on their interest-bearing assets. Net interest margin – the difference between interest earned on borrowings and interest paid on deposits – increased year-on-year and quarterly for the four large banks, with the exception of Wells Fargo, whose assets are capped , NIM on the quarter has not changed. The improvement in the NIM shows that, despite four rate increases in 2018, profitability is satisfactory; Deposit costs do not increase faster than loan revenues.
Gerard Cassidy, of RBC Capital Markets, wrote before earnings that investors should focus on three types of bank stocks: those that return capital, those that apply a "risk" strategy, and those that include multiple reassessment.
While the largest banks' offices were swamped by volatility, RBC highlighted supra-regional banks less dependent on financial markets, such as M & T Bank Corporation (MTB), which Cassidy described as "champions of the banking sector. Super Bowl ". one of the most successful US banks because of its ability to return 146% of its earnings to shareholders in the form of dividends and share buybacks, favored by a "robust" growth of commercial and industrial lending and controlled costs.
The story continues