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Big Banks Q1 earnings: ‘Higher for longer’ rates create a questionable future

  • Net Interest Income took a downturn for some of the incumbent banks, impacting their financial performance in the first quarter of 2024.
  • While some of the big banks experienced growth in non-interest income this quarter, too, the impact of decreased Net Interest Income on revenues can ratchet up the focus to reduce costs and maintain earnings.

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Big Banks Q1 earnings: ‘Higher for longer’ rates create a questionable future

    The dilemma of balancing Net Interest Income & Non-Interest Income



    The predictions of Citi’s Jane Fraser, Morgan Stanley’s Ted Pick, and JPMorgan’s Jamie Dimon for 2024 have (actually) come true.

    During the closing quarter of 2023’s earnings season, the three CEOs of America’s leading banks anticipated that ongoing inflation would persist into the new year, potentially prompting a prolonged stance by the Federal Reserve and a continuation of elevated interest rates. This outlook translated into the first-quarter 2024 earnings of major banks, as evidenced by their recent results.

    The past quarters saw significant profit gains for most major banks, driven mainly by high-interest rates. However, the scenario with rate hikes is a double-edged sword for banks, and it appears that major banks are stuck between a rock and a hard place due to this issue. Net Interest Income [NII] took a downturn for some of these incumbent institutions, impacting their financial performance in the first quarter of 2024.

    Despite JPMorgan’s strong performance in the last quarter and a banner year in 2023 with a record annual profit of nearly $50 billion, the bank saw a 4% decline in NII this quarter compared to the previous quarter, marking its first decrease in 11 quarters. NII rose 11% YoY. NII for the first quarter of this year dropped by 4% and 8% at Wells Fargo and by 6% and 4%  at Citigroup compared to the prior quarter and the same period last year.

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