Banking CFOs cite resilient consumer despite mixed sentiment
JPMorgan, Goldman Sachs, Wells Fargo and Citigroup reported higher third-quarter profits this week, with executives on their earnings calls describing a US consumer that remains resilient even as JPMorgan’s chief executive said the bank is moving to tighten credit terms.
At Wells Fargo, Scharf pointed to growth in customer balances paired with a clean credit picture. “While economic uncertainty exists and consumer sentiment remains mixed, our data shows that our consumer and business customers are doing well. Consumers are spending more, loan delinquencies are low, and deposit and investment balances have grown,” he said on the bank’s call. Wells Fargo CFO Mike Santomassimo characterized the US consumer as “really good” and called the delinquency and charge-off performance “supportive of a good second half of the year,” adding that “overall, you’re seeing really good performance on the consumer side.” The comment echoed the cautious optimism the banks expressed about the U.S. economy, with executives saying businesses and consumers are still spending and look resilient.
JPMorgan’s Dimon struck a more guarded note on credit. “I’m not going to give you very specific stuff, but we’re tightening up a little bit on credit,” Dimon said during the bank’s call with analysts Tuesday morning. “I think some of the credit terms have gotten a little bit loose… We just don’t feel like we have to chase that kind of stuff anymore.” The remarks suggest the bank sees room to step back from looser credit terms even as the broader consumer picture remains steady.
Citigroup’s view lined up with Wells Fargo’s on consumer credit. “We continue to see strong consumer credit performance as both net credit loss and delinquency rates in our overall cash portfolio declined year-over-year,” Luchetti said on the bank’s call with analysts. Together, the three banks’ characterizations pointed to an industry that sees its consumer book as resilient, while moving more deliberately on credit terms.
The earnings calls came alongside fresh housing market data. Sales of previously owned homes rose 1.5% in September to a seasonally adjusted annual rate of 3.99 million, the National Association of Realtors said Tuesday. Economists surveyed by The Wall Street Journal had forecast a 0.8% decline. The September figures largely reflect purchase contracts signed in July and August, when mortgage rates were in the mid-6% range, and mark a rebound from August, when sales fell 3.2% from the prior month.
The week also brings two closely watched economic releases. The Bureau of Labor Statistics is set to publish the September consumer-price index, and the Federal Reserve will release its Beige Book summarizing conditions across its districts for the seventh of eight times this year. Both reports will be parsed for signs of whether the resilient consumer the four bankers cited is being sustained.
Elsewhere in the week’s corporate finance reporting, Mission Produce’s chief financial officer described the long planning horizon of the avocado business. “You’re making decisions today on fruit that’s not going to reach the market until five to seven years down the road,” Bryan Giles said in an interview with CFO Journal’s Kristin Broughton, discussing the financial planning challenges of starting a farming location from scratch. At an investor day last week, the Oxnard, Calif.-based avocado company set a target of doubling sales by 2035.