Bank earnings fail to impress investors as recession worries grow

New York

JPMorgan Chase, Bank of America, Citigroup and asset management giant BlackRock posted results on Friday that beat Wall Street forecasts, but investors were still disappointed.

Shares of JPMorgan Chase ( JPM ) and BofA ( BAC ) were down about 3% in early trading. Wells Fargo ( WFC ), which reported earnings that beat Wall Street targets, fell 4%. Citi ( C ) was unchanged and BlackRock ( BLK ) slipped about 1%.

Investors may have been disappointed by the dour tone of the big banks. Executives clearly remain concerned about inflation and the threat of a recession this year after several big interest rate hikes by the Federal Reserve.

JPMorgan Chase CEO Jamie Dimon said in the bank’s earnings report that while the economy is still strong and consumers and businesses are spending healthy, “we still don’t know the ultimate effect of the headwinds coming from geopolitical tensions including the war in Ukraine, vulnerable inventory conditions energy and food, constant inflation that erodes purchasing power and pushes interest rates higher.”

In its earnings announcement, the bank added that it now expects a “mild recession” as the basic economic case. CFO Jeremy Barnum added during a conference call with reporters that with the slowdown already underway in his home lending unit, he is starting to see “headwinds” in auto lending.

Meanwhile, BofA CEO Brian Moynihan noted that this is a “slowing economic environment,” and Wells Fargo CEO Charlie Scharf said “we are carefully monitoring the impact of higher rates on our customers.” Wells Fargo recently announced plans to spin off its massive mortgage business.

Concerns about the economy were one of the reasons stocks fell in 2022, the worst year since 2008. As a result of Wall Street’s slump, there was a big slowdown in merger activity and initial public offerings.

This has hurt investment banking business for leading banks. JPMorgan Chase and Citi said advisory fees fell nearly 60% in the quarter.

Goldman Sachs ( GS ) and Morgan Stanley ( MS ) will provide more color on the health of Wall Street next Tuesday when both report fourth-quarter results.

Goldman Sachs, which has aggressively built up its consumer banking unit over the past few years, has made hard money in that department. Goldman Sachs revealed in a regulatory filing on Friday that it has lost more than $3 billion in consumer business since 2020.

There were, however, some signs of optimism. BlackRock, which owns the vast iShares family of exchange-traded funds, reported a rebound in assets under management from the third to fourth quarter as shares surged in October and November.

“The current environment offers incredible opportunities for long-term investors,” BlackRock CEO Larry Fink said in an earnings release.

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