Despite creeping economic optimism, top US Banks are sending warning signals on the economic impacts expected to be felt over 2023/ 2024.

Below are quotes from Black Rock and JP Morgan who together represent trillions of assets.

It has been a long held approach by banks for as long as I remember, to delay interest rate increases on deposits during times of rate increases. So the tears being shed due to rate increases coming are more of a warning and message to markets, that reflect capacity to increase revenue easily and quickly.

Meanwhile banks are already enjoying benefit of higher rates on floating rate loans.

The message to markets, politicians and consumers is to expect these changes and there is implicit air cover for 100’s of smaller banks to follow suit.

The underlying message is that the impact of the economic shifts from undoing QE as well as reacting to other moves by the Fed will have both short and long term impacts that will take years to work themselves through the financial system. This is of more economic consequence that the daily discussion about whether we are in recession.

I listened to an Economist webinar yesterday and the recession impacts is has geographic and demographic differences Bothe in US and Europe. Demographically it will be felt by lower paid, part timers and geographically more in Europe than in US.

Here are the Bank quotes:

BlackRock’s Larry Fink warns of ‘substantial’ impact from markets on earnings

BlackRock’s Larry Fink warns of ‘substantial’ impact from markets on earnings

BlackRock’s Larry Fink has admitted that “negative markets had a substantial impact” on the world’s largest fund manager last year, wiping out $1.4tn of its assets and hitting profits.

In an internal memo seen by the Financial Times, the chief executive said the operating environment “is unlike anything we’ve seen in decades”.

His comments come as asset managers across the industry have suffered steep declines in assets under management amid one of the toughest market environments in recent history. Global stocks and bonds fell last year by nearly 20 per cent and 14 per cent respectively.

JP Morgan report

https://www.ft.com/content/df30d836-80ce-444d-a15c-4863756e4144

Like other Wall Street banks, JPMorgan has benefited from Federal Reserve interest rate rises boosting net interest income — the difference in what banks pay on deposits and what they earn from loans and other assets.

Fourth-quarter earnings on Friday showed JPMorgan, the largest US bank by assets, raked in a record $20.3bn in net interest income, an increase of 48 per cent over the same period last year.

However, JPMorgan said it was expecting net interest income for 2023, excluding its trading division, to be about $74bn — well below what many analysts had forecast.