Profits at Bank of America Corp, JPMorgan Chase & Co, Wells Fargo & Co and Citigroup Inc beat analysts’ forecasts as the lending giants reaped windfall from rising interest rates. But industry chiefs have warned that power will fall this year as a recession looms and customer payment delays become a reality.
“We’ve seen some trends in consumer financial health gradually declining from a year ago,” said Mike Santomassimo, Wells Fargo’s chief financial officer.
As large and mid-sized lenders become more conservative in their underwriting, their net write-downs will likely peak in a few quarters, notes Morgan Stanley analyst Betsy Graseck.
Worsening economic conditions would lead to “credit deterioration through 2023 and 2024, with losses eventually exceeding pre-pandemic levels given a looming recession,” UBS analysts led by Erika Najarian predicted. However, loan defaults are expected to remain “below peaks seen in previous recessions,” according to them.
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