America’s biggest banks had the same message Tuesday: people are still spending and paying their credit card bills, even with gas prices up and borrowing costs climbing. JPMorgan Chase, Wells Fargo, Citigroup and Goldman Sachs all reported third-quarter results, and the consumer numbers looked better than a lot of people feel.
“Consumers are spending more, loan delinquencies are low, and deposit and investment balances have grown,” Wells Fargo CEO Charlie Scharf said, Yahoo Finance reported. But JPMorgan CEO Jamie Dimon sounded a warning, and the details show who’s doing fine and who’s stretched.
What did the big banks say about consumers?
JPMorgan’s debit and credit card spending hit $539.5 billion, up 10% from a year earlier, and its CFO, Jeremy Barnum, said spending grew across gas, travel and other categories, PYMNTS reported. Citi said U.S. card spending rose 11%. Wells Fargo opened more than 660,000 new credit card accounts, and its auto loan originations jumped 15%, Quartz reported.
Wells Fargo CFO Mike Santomassimo told CNBC: “I think despite higher gas prices, both sides of the equation have been able to really work through that. We’re just not seeing any sort of cracks around delinquency trends.” Barnum added that, leaving out the extra money going to gas, underlying spending is still holding up.
Are Americans carrying more credit card debt?
Yes. JPMorgan’s average credit card balances were $250.1 billion last quarter, up from $234.4 billion a year earlier and $243.5 billion in the spring. That’s about 7% more debt on JPMorgan cards alone in a year. What’s held up is people’s ability to pay it: the share of card debt JPMorgan wrote off as unpaid fell to 2.91% from 3.15%. Wells Fargo’s fell to 3.73% from 4.02%, and Citi’s to 3.6% from 4%.
Still, the banks are getting more careful. Citi and Wells Fargo both set aside more money for possible loan losses than a year ago, and JPMorgan’s set-aside rose from the previous quarter.
What is Jamie Dimon warning about?
Interest rates. Dimon told reporters that another percentage-point rise in rates could be particularly painful, as borrowers refinance at higher costs. Barnum put it plainly on the analyst call: “The consumer remains currently healthy due to a strong labor market.” But an extended stretch of high rates to fight inflation “could eventually increase unemployment and impact credit performance.”
JPMorgan itself had a rough day. It posted a rare earnings miss, $5.57 a share against analysts’ $5.90 estimate, and its stock fell about 3.5% before the opening bell. Before Tuesday, it had beaten estimates in 16 of the past 20 quarters, CNBC reported. Bank of America and Morgan Stanley report Wednesday.
What does this mean for your wallet?
- If you carry a card balance: rates are rising, and banks are bracing for more losses. Paying down high-rate card debt now beats waiting.
- If you’re shopping for a car or a card: banks are still lending freely, with Wells Fargo’s auto loans up 15%, so shop around for the rate.
- If you’re saving: deposits are growing again at the big banks, but big-bank savings accounts typically pay far less than online banks, so check what yours earns.
The BeezLoop Take
The banks are telling the truth about the average customer, and the average is doing fine. But averages hide the people at the bottom. A family paying more for gas and putting it on a card shows up in these numbers as “spending growth.” It doesn’t feel like growth at the kitchen table.
The real story is in Barnum’s own words: everything rests on jobs. Card debt is up 7% in a year at the biggest bank in the country. That’s fine while paychecks keep coming. If layoffs pick up while rates stay high, those write-off rates won’t stay this low for long.
The open question: if the job market cools, how fast does this healthy consumer turn into a stretched one?
Also on BeezLoop: is bargain shopping dead? Where the deals went, and Trump’s Russian diesel deal to lower prices before the midterms.
Sources: CNBC · Yahoo Finance via AOL · PYMNTS · Quartz · Bloomberg Television (video)
