Interest Rate Hike Boosts Big Banks, Leaves Customers Behind
Big banks like JPMorgan Chase, Citigroup, and Wells Fargo are benefiting from higher interest rates, leading to increased earnings in the third quarter. Their advantage lies in leveraging these rates by charging more for loans while paying less for deposits compared to smaller rivals. However, there are signs that borrowers are starting to struggle, as evidenced by increased loan write-offs. Citigroup's CEO warned of a cautious consumer and expects credit card losses to reach pre-COVID levels by year-end. Wells Fargo's CEO noted declining loan balances and deteriorating charge-offs. JPMorgan's CEO expressed concerns about consumers spending down their excess cash buffers amid elevated inflation risks. Smaller lenders like PNC are also facing challenges in navigating higher rates, with profits and net interest income falling.