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Industry titans JPMorgan Chase and Wells Fargo exceeded third-quarter profit forecasts, showcasing resilience amid economic uncertainties. JPMorgan's shares surged 5% as investment banking revenues outperformed expectations, jumping 31% against management's projected 15% growth.
The bank's Chief Financial Officer Jeremy Barnum noted that the results aligned with a "soft-landing narrative," though CEO Jamie Dimon maintained a cautious outlook given escalating global tensions. JPMorgan raised its annual net interest income forecast to $92.5 billion, surpassing analyst expectations of $91.05 billion according to LSEG data.
Wells Fargo similarly delivered strong results, with shares climbing over 5%. The bank's CFO Michael Santomassimo indicated that potential Federal Reserve rate cuts could actually benefit their interest income by reducing deposit costs. However, Wells Fargo projects a 9% decline in net interest income for 2024, slightly more pessimistic than analyst forecasts of 8.4%.
Loan Performance and Credit Provisions
Both banks reported shifts in lending patterns and credit provisions. JPMorgan set aside $3.11 billion for potential credit losses, up from $1.38 billion year-over-year, primarily due to expanded lending. Wells Fargo's provisions decreased to $1.07 billion from $1.20 billion, though concerns persist about commercial real estate, particularly in the office sector.
Total loans at Wells Fargo declined to $910.3 billion from $943.2 billion a year earlier, reflecting subdued loan demand in a high-rate environment. Despite these challenges, Santomassimo emphasized that "consumer activity and spending remained quite strong."
Regulatory Landscape and Future Outlook
The banking sector awaits new Basel III Endgame proposals, which could impact capital requirements for large U.S. lenders. The Federal Reserve has reportedly softened its stance, now considering a 9% increase in big banks' capital requirements instead of the original 19%.
Wells Fargo continues to operate under a $1.95 trillion asset cap imposed by regulators, limiting its growth potential. The bank still faces eight regulatory consent orders, highlighting ongoing compliance challenges despite efforts to address historical issues dating back to the 2016 fake accounts scandal.
