Three of America’s largest lenders declare huge profits in results ‘super Friday’ after bank collapses sent shockwaves to global markets
Three of America’s largest lenders will announce huge profits this week in a ‘super Friday’ of results after a number of bank failures sent shockwaves across global markets.
JP Morgan Chase, Citigroup and Wells Fargo will disclose the extent to which they have benefited from a flight to safety as frightened savers divert their money from smaller, financially weaker lenders.
They will also show the extent to which the big banks benefited from a “flight to safety” as frightened savers are said to have moved their money from smaller, stricken lenders to JP Morgan and other established names.
Last month’s sudden bankruptcies of Silicon Valley Bank (SVB), Signature and Silvergate in the US, coupled with the dramatic collapse and rescue of Credit Suisse, have put savers and investors on edge.
While no more banks have gone to the wall in the past two weeks, many experts are still concerned that the turbulence is far from over. These include Jamie Dimon, CEO of America’s largest bank JP Morgan, who last week warned of more shocks in the coming years.
Warnings: Jamie Dimon, right, boss of the largest US bank, JP Morgan
“While this is nothing like 2008, it is not clear when this current crisis will end,” he wrote in a letter to shareholders. “It has caused a lot of turmoil in the market and will clearly lead to some tightening of financial conditions as banks and other lenders become more conservative,” he added.
One of the biggest problems has been in the bond market – or government debt – where sudden rises in interest rates have hit prices.
This caught banks putting money into bonds when interest rates were at an all-time low.
But another major issue is the loss of confidence, with the collapse of smaller banks causing huge sell-offs in financial stocks around the world for weeks.
There are lingering concerns about First Republic, another medium-sized regional US lender. Due to the report results on Wednesday, it was thrown on a £24bn lifeline by a group of Wall Street banks led by JP Morgan last month. But that hasn’t stopped the fall in First Republic’s share price, which has been trading at record lows.
The US government is also under increasing pressure to increase the federal guarantee on bank deposits from £200,000 to boost confidence in the financial system and prevent further bank runs.
In a controversial move, depositors at both SVB and Signature were fully repaid when their banks went bankrupt.
Stricter rules to stop bank runs could mean lenders being forced to hold more cash to meet sudden increases in withdrawal requirements.
The three major US banks reporting next week expect to reveal a mixed picture.
City analysts predict JP Morgan will post a profit of £10.7bn, up from £8.5bn last year and Wells Fargo – the third largest lender in the US – is set to close Friday to announce a profit of £4.5 billion, up from £3.6 billion last year.
But rival Citigroup, with 6,000 employees in London and 3,000 in Belfast, will report profits of £3.8bn in the first three months of this year, down from £4.8bn in the same period of 2022.