U.S. Banks' Q3 Profits Rise 14%, but Shares Plunge... CEOs: "Concerned About High Interest Rates"

Four banks post $32 billion in combined net income
AI investment and stock trading strong; bond trading weak
Citigroup plunges 5%; Wells Fargo falls more than 3%

Large U.S. banks posted strong results in the third quarter of this year, bolstered by increased investment in artificial intelligence (AI) and robust stock trading. However, their share prices fell as concerns grew over persistent high inflation and interest rates.

Dimon Jamie, CEO of JPMorgan

According to The Wall Street Journal (WSJ) and The New York Times (NYT), the combined net income of four major U.S. banks—JPMorgan Chase, Goldman Sachs, Citigroup, and Wells Fargo—reached $32 billion in the third quarter, up 14% from the same period a year earlier. Revenue also rose 9% to $115 billion. Demand for financing to build AI infrastructure, increased stock trading, and resilient consumer spending supported the results.

Equities trading was a key driver of the improvement. Revenue from the business rose by an average of 39% at the four banks. Goldman Sachs reported a 72% year-over-year surge in equities trading revenue, marking its second-highest quarterly result on record.

Results in bond trading and investment banking (IB) fell short of expectations. Bond-trading revenue at major banks came in below market forecasts across the board, while mergers and acquisitions (M&A) and initial public offerings (IPOs) slowed amid financial market uncertainty. This followed a recent sharp rise in Treasury yields, driven by the combined effects of conflicts in the Middle East, high inflation, and concerns about the U.S. fiscal deficit. According to CNBC, the yield on the 10-year U.S. Treasury note stood at around 5.21% on Tuesday.

Bank executives warned that persistently high interest rates could hurt profitability. JPMorgan CEO Jamie Dimon cited large fiscal deficits, entrenched inflation, elevated asset prices, rising interest rates, and geopolitical instability as key risk factors. He warned that if the U.S. Federal Reserve (Fed) raises rates again, "the next one-percentage-point increase will be more painful." He also likened the current economic situation to "an accordion that expands and contracts in an instant," expressing concern about the possibility of sharp economic swings.

Wells Fargo CEO Charlie Scharf said, "Inflation and high interest rates continue to be headwinds," adding, "The longer this situation persists, the greater the burden could become for both consumers and business customers." Banks nevertheless said there were no clear signs of weakening consumer spending yet, given that employment and wage growth remained resilient.

Following the comments, the KBW Nasdaq Bank Index fell 1.4% on Tuesday. Shares of Citigroup and Wells Fargo, which reported results that exceeded market expectations, plunged 5.6% and 3.1%, respectively.

Meanwhile, John Williams, president of the Federal Reserve Bank of New York, said in an interview with Bloomberg on Tuesday, "My view that another rate hike could be appropriate has not changed," while adding, "At this point, I see no reason to believe further increases will be needed after that." The Fed raised its benchmark interest rate by 0.25 percentage points at last month's Federal Open Market Committee (FOMC) meeting.

This content was produced with the assistance of AI translation services.