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New York
CNN
—
JPMorgan Chase, Bank of America, Citigroup and asset management giant BlackRock announced results on Friday that beat Wall Street expectations, but investors were still disappointed.
Shares of JPMorgan Chase & Co. (JPM) are down about 2% in early trading, while BofA (BAC) is down about 3%. Wells Fargo (WFC), which reported earnings missing Wall Street targets, fell 4%. Citi (C) and BlackRock (BLK) each lost about 1%.
“Even though earnings were strong, the market is concerned about recession fears,” said John Curran, managing director and head of North American banking at MUFG.
Investors may have been alarmed by the pessimistic tone of the big banks. It’s clear that management remains concerned about inflation and the threat of recession this year, after several big rate hikes by the Federal Reserve.
JPMorgan Chase & Co. Chief Executive Jamie Dimon said in the bank’s earnings call that while the economy remained strong and consumer and business spending were healthy, “the geopolitical situation, including the war in Ukraine, is The ultimate impact of headwinds from economic tensions is yet to be seen: fragile energy and food supplies, persistent inflation that is reducing purchasing power and pushing up interest rates.”
In its earnings call, the bank added that it expected a “moderate recession” as its base economic scenario. In a conference call with reporters, CFO Jeremy Barnum added that the auto lending sector is starting to see “headwinds” on top of the slowdown that has already begun in the mortgage sector.
Meanwhile, BofA CEO Brian Moynihan said this was “an increasingly slowing economic environment,” while Wells Fargo CEO Charlie Scharf said, “Rates We are closely monitoring the impact of the rise on our customers.” Wells Fargo recently announced plans to wind down its large mortgage business.
Banks are clearly worried about a looming recession, and Wall Street is watching.
JPMorgan Chase & Co.’s “credit reserves have increased,” Moody’s Investors Service analyst Peter Narby said in a note, while Citi said it had “raised capital and reserves in anticipation of a slowdown in core markets.” have accumulated,” he said.
The Federal Reserve’s interest rate hikes haven’t helped either.
“Higher-than-expected interest rates pose a significant risk to credit quality, loan growth and the outlook for net interest margins,” David Wagner, portfolio manager at Aptus Capital Advisors, said in an email.
Economic concerns were one of the reasons stocks plunged in 2022, the worst year since 2008. Merger activity and initial public offerings have slowed significantly as a result of Wall Street’s slump.
This hit the investment banking business of the top banks. JPMorgan Chase and Citi each said advisory fees plunged nearly 60% from his in the fourth quarter.
Goldman Sachs (GS) and Morgan Stanley (MS) will provide more detail on Wall Street’s health when they report their fourth quarter results next Tuesday.
Goldman Sachs, which has been aggressively building its consumer-banking arm in recent years, has struggled to turn a profit in that unit. Goldman Sachs said in a regulatory filing on Friday that it has lost more than $3 billion from its consumer business since 2020.
But there were also signs of optimism. BlackRock, which owns the huge iShares family of exchange-traded funds, reports a rebound in assets under management in the third and fourth quarters as stock prices surged in October and November.
BlackRock CEO Larry Fink said in the earnings call:
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