Big Bank Earnings: The Resilience of Consumer Spending
As earnings season begins, a trio of results from major banks indicate variations on certain themes: consumers continue to spend, loan losses look manageable… and technology underpins it all (and banks will need to continue to spend on technology to keep pace with the digital age).
To that end, digging deeper into the earnings reports, we see continued reversals in loan loss reserves, growth in card and debit spending, and growth in mobile banking users.
Consumer (spending) increases while loan loss reserves decrease
For JP Morgan, as we noted following that firm’s report, debit and credit sales volume was $376.2 billion in the most recent period, up 26%. over a year. Credit card sales volume increased 29% from a year ago, recently reaching $254.1 billion.
Also Read: JPMorgan’s Active Mobile Customers Reach 59 Million, Technology Investment Surpasses $12 Billion
CEO Jamie Dimon said in the statement that “Credit continues to be healthy with exceptionally low net charges, and we remain bullish on U.S. economic growth.” Total net write-offs in the last quarter were $515 million, compared to $817 million a year ago; the total provision for loan losses fell to $12.3 billion in the fourth quarter from more than $22 billion a year ago.
Wells Fargo belongs earnings supplements show that its provision for credit losses for loans is $13.8 billion, down $5.9 billion from the fourth quarter of 2020 and $917 million from the third quarter of this year. Wells’ credit card revenue grew 3% in the last quarter, driven by higher point-of-sale volume. Debit card volumes were $122.4 billion in the quarter, up 16% year-over-year. Credit card point-of-sale volume during the period increased more than 28% to $29.4 billion.
Also read: Wells Fargo beats forecast with $5.8 billion in fourth-quarter profit
Wells management noted on the conference call that credit quality is improving significantly as the economy improves and customers have high levels of liquidity.
CEO Charlie Scharf said on the call that “holiday sales were strong, with spending up 31% in the three weeks leading up to Thanksgiving, and that momentum continued after Thanksgiving. All spending categories rose in the fourth quarter from a year ago, with the biggest increases in travel, fuel, entertainment and meals.
Citi results, alongside its earnings release, show that card spending in North America was $115 billion in the last quarter, up 24% year-on-year, while average card lending increased by 3% over the corresponding periods to $85 billion; international card spend volume increased 11% to $28 billion.
Net credit losses on its global retail banking division were $805 million, down from $1.2 billion a year ago. Management said on the call that in the U.S., strong buy-sells continue to be offset by high payout rates — but, as CEO Jane Fraser noted, “We saw lending increase in branded cards this quarter. Deposits and assets under management continued to grow, with digital deposits up nearly 20% for the year as a whole. »
The digital shift
When it comes to the great digital shift, we are turning to our devices more than ever to do our day-to-day banking.
For JP Morgan, total active digital customers in the quarter were 58.9 million, up 6% year-over-year and 2% sequentially. Active mobile customers exceeded those rates, rising to 45.5 million, up 11% from the fourth quarter of last year.
Wells Fargo said in its supplemental filings that digital customers (online and mobile) were 33 million, up 3% from a year ago. Active mobile customers in the fourth quarter were 27.3 million, up 5% from a year ago. Management said on the call that even with existing capabilities, in the fourth quarter customers connected 1.6 billion times using a mobile device, up 7% year-on-year. on the other.
Citigroup said its active digital users jumped 6% year over year to 37 million in the last quarter; active mobile users grew 11% to 28 million.
And in quantifying the technology investments needed to achieve even greater digital adoption for both consumers and businesses, JP Morgan management said on the conference call with analysts that technology investments exceeded $12 billion. dollars on an annual basis, half of which related to regulatory and modernization efforts.