Four of the largest US banks delivered another round of solid quarterly earnings on Tuesday, offering fresh evidence that the American economy remains resilient. Consumers are still repaying debts on time, and businesses continue to pour money into artificial intelligence. Yet the same institutions that beat profit expectations also sounded a cautious note about the months ahead, pointing to higher interest rates, persistent inflation and the strain those could place on households.
JPMorgan Chase, the country's biggest lender by assets, reported a net profit of $15.3 billion for the third quarter, or $5.57 per share, up from $14.4 billion, or $5.07 per share, a year earlier. That fell short of the $5.93 per share analysts had pencilled in — a rare miss for the bank and its chief executive, Jamie Dimon. The last time JPMorgan disappointed Wall Street was nearly three years ago. The bank booked $658 million in losses on investment securities and saw expenses climb 12% year on year. Fixed income trading revenue slipped 4%, though overall markets revenue rose 15%.
Dimon struck a characteristically cautious tone in the accompanying statement. “The US economy continued to be fueled by strong business investment and ongoing consumer spending,” he said. “However, large fiscal deficits, sticky inflation, elevated asset prices, rising interest rates and geopolitical conditions continue to shift under the surface.”
The big banks traditionally open the quarterly earnings season, and this one carries particular weight for equity markets. Strong corporate profits have helped push the S&P 500 to record levels, and analysts expect companies in the index to report earnings per share growth of nearly 30% from a year earlier, according to data provider FactSet. If realised, that would mark the third consecutive quarter of growth above 25%.
Goldman and Citigroup shine, Wells Fargo steady
Goldman Sachs saw its third-quarter profit jump sharply, helped by a 72% surge in equities trading revenue from a year earlier. The bank posted a profit of $5.29 billion, or $17.01 per share, compared with $4.1 billion, or $12.25 per share, in the same period last year. However, its fixed income, currencies and commodities revenue fell 24% from the second quarter, reflecting a turbulent summer in bond markets as investors grew increasingly worried about government spending and inflation. Yields on 10-year and 30-year US Treasuries climbed to multi-year highs, and higher diesel, technology and food prices gave the Federal Reserve reason to raise interest rates last month, despite pressure from the White House to hold off.
Citigroup reported a 40% jump in third-quarter profit from a year earlier, beating Wall Street expectations. Revenue rose in investment banking and wealth management, while credit card profits were flat. Wells Fargo, based in San Francisco, posted a profit of $5.95 billion, or $1.87 per share, also ahead of forecasts. The bank has seen its earnings climb steadily in recent quarters after federal regulators removed the asset cap imposed following its sales practices scandal nearly a decade ago.
For European readers, the resilience of US banks is a useful counterpoint to the more cautious outlook across the Atlantic. While European lenders have also benefited from higher interest rates, their recovery has been patchier, and the push to deepen EU capital markets remains a work in progress. The US results also underscore the continued strength of American consumer spending, which has helped sustain global demand for European exports. At the same time, the warnings from Dimon and his peers about fiscal deficits and inflation echo concerns that European policymakers are grappling with as they try to balance growth with price stability.
The broader economic picture is far from uniform. While the US labour market remains tight and corporate investment in AI shows no sign of slowing, the recent volatility in AI-related markets serves as a reminder that sentiment can shift quickly. For Europe, the key question is whether the region can sustain its own momentum in technology and innovation, or whether it will continue to lag behind the US in the race to build the next generation of digital infrastructure.
As the earnings season unfolds, investors will be watching closely for signs that the US economy can navigate the delicate balance between growth and inflation. The banks' results suggest that, for now, the consumer remains in decent shape. But the warnings from the country's top bankers are a reminder that the path ahead is unlikely to be smooth.
