US banks post solid third quarter loan growth

Major US banks, including JPMorgan Chase, Citigroup, and Wells Fargo, reported strong loan and deposit growth in the third quarter, despite the high-interest-rate environment. The banks all saw increased net interest incomes, which surprised analysts who had predicted that soaring bond yields and higher borrowing costs would curb loan demand and trigger deposit outflows.

Consumer lending remains crucial for the economy, although higher prices have dampened consumer sentiment, according to a Wells Fargo executive. Citigroup experienced an 11 percent increase in average deposits and a 12 percent jump in average loans, while Wells Fargo saw a 10.7 percent rise in average deposits and an 11 percent jump in average loans.

JPMorgan Chase had a 4 percent increase in average deposits and a 2 percent increase in loans compared to the previous year. Despite these positive metrics, banks face funding pressures as US Treasury yields hit record highs, causing customers to seek better returns elsewhere and forcing lenders to raise deposit rates, thus squeezing their margins.

Analysts noted that there are no significant concerns about the overall bank credit quality, indicating that households have managed their debt obligations effectively. However, a weakening labor market and rising living costs could pressure borrowers, especially if prolonged conflicts lead to higher prices for essential goods and reduce discretionary spending.

While some analysts expressed concern about consumers shifting away from discretionary items, JPMorgan CFO Jeremy Barnum stated that internal data does not reflect such a shift. US consumer prices increased by 3.4 percent in the 12 months through August, matching July's rise, and a key measure of underlying inflation showed its largest monthly gain in four months.

Job growth in the US slowed more than expected in September, and previous month's payrolls experienced sharp downward revisions. In response to the Federal Reserve's rate hike, major US banks raised their prime lending rates in September.