What recession? US banks show few signs of trouble – KION546


By Julia Horowitz, CNN Business

If a recession were to come to the United States, there would normally be signs of pain among America’s biggest lenders. But so far the big banks see no major signs of weakness, although they admit they are bracing for tougher times ahead.

What is happening: Results from JPMorgan Chase, Wells Fargo and Citigroup reveal that while Wall Street has been hit hard by the deep market crisis, Main Street is buzzing. Credit card spending still looks healthy. While banks are setting aside more money to cover bad debts, they don’t yet see any significant problems.

“If you weren’t looking at anything else – you were just looking at bank numbers – you wouldn’t think there’s a recession around the corner,” Mark Conrad, portfolio manager at Algebris Investments, told me. .

To move back: JPMorgan Chase CEO Jamie Dimon spooked investors last month when he predicted an economic “hurricane” caused by war in Ukraine, growing inflationary pressures and interest rate hikes from the Federal Reserve.

A slump in deals has sharply reduced the amount of money investment bankers bring in after a blockbuster in 2021. JPMorgan’s investment banking revenue fell 61% last quarter. At Morgan Stanley, it fell 55%.

“It was expected to be a weak point, and it was,” Argus Research analyst Stephen Biggar told me. “They just haven’t made a lot of deals.”

But elsewhere, activity seemed solid. Credit and debit card spending rose 15% year over year, JPMorgan said. While consumers are shelling out significantly more for gas, travel and dining still jumped 34%.

“You can see how resilient the consumer is in the United States with the high payment rates and low level of credit losses,” Citi CEO Jane Fraser said in a call with analysts.

Demand for business loans is also still strong, although executives say their confidence is down.

Mortgage is an exception. Wells Fargo saw a 53% drop in revenue from this business compared to the same period last year, while JPMorgan saw a 26% drop.

Mortgage rates jumped as the Federal Reserve aggressively raised its benchmark rate in an effort to limit the surge in prices, eroding demand. The Wall Street Journal reports that the Fed is likely to hike rates by three-quarters of a percentage point later this month, dampening expectations that it could pursue an even bigger hike.

Overview: Overall, the numbers look solid. However, this does not mean that a recession is not possible. The banking mantra right now is: “Hope for the best, prepare for the worst”.

“We know that if you have a recession, the losses will increase,” Dimon said. “We are preparing for all of this.”

JPMorgan, Citi and Wells Fargo have announced they will set aside billions of dollars to cover bad debts if needed, while Citi and JPMorgan are suspending share buybacks to conserve cash.

Coming : Bank of America’s results and CEO Brian Moynihan’s comments will be watched closely to see if they follow the trend.

Struggling Boeing promises better times ahead

Boeing is going through a tough time that has hurt its stock and its reputation as one of America’s most powerful titans.

But as the Farnborough Airshow kicks off on Monday, Boeing management struck an optimistic tone.

“I actually feel pretty good right now,” CEO Dave Calhoun told the Financial Times. “The most difficult of our crises is to be managed effectively.”

Remember: The crashes of two of the 737 Max jets that killed all 346 people aboard the flights led to a crippling 20-month grounding of the aircraft. It was one of the costliest mistakes in corporate history, costing Boeing more than $20 billion. It has also been forced to delay deliveries of its 787 Dreamliner jumbo jet due to quality control issues and is pushing back the start of production of its 777X jetliner.

The company said ahead of the airshow that it was “very close” to getting the approvals it needed to resume Dreamliner deliveries. It had about 115 planes in its inventory at the end of March.

Boeing announced Monday that Delta Air Lines has ordered 100 of its 737 Max jets. It is Delta’s largest order from Boeing since 2011. Delta is the only major US airline that did not already have a 737 Max.

Investor Insight: Boeing could use a win or two. Its shares are down nearly 27% since the start of the year, while shares of rival Airbus are only 7% lower.

Is Gasoline Going Back to $4 a Gallon?

U.S. gasoline prices have eased back to an average of $4.52 a gallon after hitting record highs of over $5 a gallon a month ago.

The White House is betting it has more headroom, a positive side effect of global recession fears.

“I expect it to come down more toward $4,” Amos Hochstein, the presidential special coordinator for international energy affairs, told CBS’s “Face the Nation” on Sunday. “And we already have plenty of gas stations across the country that cost less than $4.”

Hochstein – who joined President Joe Biden during his visit to Saudi leaders last week – hinted that Gulf states could announce increased production in the coming weeks, easing supply constraints.

“Based on what we heard on the trip, I’m pretty confident that we’ll see a few more stages in the coming week,” he said.

But forecasting oil prices for the rest of the year remains a tough bet. Europe is looking for replacements for Russian barrels. If China relaxes its strict efforts to contain the spread of Covid-19, demand for rough from the world’s largest importer could surge, further tightening markets. And it’s unclear whether countries like Saudi Arabia and the United Arab Emirates will ultimately tap into their limited spare capacity.

Watch this place: Global oil prices ended last week at around $101 a barrel, 27% below their March high. However, they remain volatile. On Monday, they climbed 2%, back above $103 a barrel

Next

Bank of America, Goldman Sachs and Synchrony Financial publish their results before the opening of the American markets. IBM follows after the close.

Also today : The NAHB Housing Market Index for July arrives at 10 a.m. ET.

Coming tomorrow: Earnings from Truist, JB Hunt and Netflix.

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