Unpacking the big bank earnings bonanza

Earnings season kicked off on Wall Street last Friday, with four of the top six US banks reporting their results for Q4 of last year.

However, economic analysts weren’t exactly prepared for what these results said – and it doesn’t take Sherlock Holmes with a magnifying glass to figure out why.

All four banks fell short of analysts’ expectations due to the timing of fees associated with the FDIC’s rescue of Silicon Valley Bank and Signature Bank last spring. The banks opted to include these one-time fees in their Q4 earnings reports, bringing down overall results.

• JPMorgan Chase reported a 15% annual drop in Q4 earnings – largely due to a $2.9 billion FDIC rescue fee – but closed out its most profitable year on record.
• Citigroup saw a $1.8 billion quarterly loss, which the bank almost entirely attributed to its $1.7 billion FDIC fee.
• Bank of America reported $3.1 billion in Q4 profit, down 50+% compared to the previous year, in addition to a $2.1 billion FDIC fee.
• Wells Fargo experienced an annual increase in Q4 earnings, despite a $1.9 billion FDIC fee.

🏡 Meanwhile, on Main Street: Bank executives said their metrics regarding the US consumer came in strong last quarter, due to wage gains outpacing inflation and a robust labor market. But they also warned that more pain could be ahead: higher costs and interest rates are causing more Americans to fall behind on their mortgage, car, and credit-card payments.