Big Banks Post Higher Profits but Warn of Sticky Inflation and Rising Rates

The country’s largest banks opened the third-quarter earnings season on Tuesday with profits that rose from a year ago, along with cautions from their leaders that stubborn inflation, heavy government borrowing and higher interest rates could test an economy that has so far kept growing.

JPMorgan Chase, the biggest American bank, earned $15.3 billion, or $5.57 a share, up from $14.4 billion, or $5.07 a share, a year earlier, according to its filing with the Securities and Exchange Commission. That was below the roughly $5.93 a share analysts had expected, the bank’s first earnings miss in nearly three years. Revenue of about $50 billion also came in under forecasts, CNBC reported. The shortfall was blamed largely on slower fixed-income trading and higher expenses.

Chief executive Jamie Dimon said strong business investment and consumer spending continue to power the economy. He also listed what he sees as risks: sticky inflation, large fiscal deficits, elevated asset prices and rising interest rates. JPMorgan’s shares rose slightly in early trading and ended the day roughly flat, according to 24/7 Wall St.

Goldman Sachs was the standout. It earned $5.29 billion, or $17.01 a share, up from $4.1 billion, or $12.25 a share, a year earlier, well above Wall Street’s estimates. A strong quarter in stock trading carried the results, even as bond trading slowed. Its shares rose about 2 percent.

Citigroup reported a profit about 40 percent higher than a year earlier, or about 17 percent excluding a goodwill charge in the year-earlier quarter, and beat expectations, helped by investment banking and wealth management, while profits from its credit card business fell 8 percent on flat revenue. Wells Fargo earned $5.95 billion, or $1.87 a share, also topping forecasts. Its profits have climbed steadily since federal regulators lifted the cap on its size that had been imposed after its sales-practices scandal, though its shares fell after revenue came in light, 24/7 Wall St. reported.

The results arrive at an unusual moment for lenders. The Federal Reserve raised interest rates last month, after higher prices for diesel, technology and food gave it reason to, the Associated Press reported, and a summer selloff in government bonds pushed yields on 10-year and 30-year Treasuries to levels not seen in years. Higher rates can lift what banks earn on loans, but they also raise the risk that borrowers fall behind.

So far, executives say, households and businesses are holding up, and that is their strongest point: Dimon said consumer spending and business investment remain strong even after months of high fuel prices and a rate increase. Skeptics note that a few weak quarters for trading or credit could quickly change the picture, and that bank results describe a period that has already ended.

More large banks are scheduled to report results later this week.