Big banks conclude 2023 earnings with glimpses of triumphs and an increasing array of challenges

  • Big banks still find themselves surrounded by repercussions of past strategic decisions and other developments driven by recent changes.
  • The far-reaching reverberations of the 2023 bank failures negatively impacted big banks in multiple facets and made a significant dent in their Q4 earnings.

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Big banks conclude 2023 earnings with glimpses of triumphs and an increasing array of challenges

Wall Street banks have kicked off the official earnings season for the final quarter of 2023. As the closing quarter inherently offers insights into the financial trajectory of these institutions throughout the year, big banks still find themselves surrounded by repercussions of strategic decisions made earlier [hint: Citi] and other major developments driven by recent changes.

Some have disclosed upcoming big initiatives expected to transpire over the next two years. For instance, Citi has announced a phased implementation of job cuts spanning this period, while Bank of America will be strategically channeling investments into technology in various capacities.

Anticipation builds as the Federal Reserve has signaled a forthcoming reduction in borrowing costs with a targeted rate of 4.6% by the end of 2024. This may lead to three rate cuts throughout the year should inflation continue its descent. While the Fed’s intention for a soft landing may bring a sense of optimism to the mortgage market, stock market, investors, and the broader economy, banks will have to offer loans at a lower interest, which could eat into their net interest incomes they have been enjoying over the recent quarters.

However, Citi’s Jane Fraser, Morgan Stanley’s Ted Pick, and JPMorgan’s Jamie Dimon share the belief that ongoing inflation will likely transition into this year, too, potentially leading to a more persistent Fed stance and an extension of higher interest rates.

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