Bank Earnings Show Companies Opting to Spend With Caution

As banks weighed in this month with their earnings reports, Wall Street has focused on earnings per share, investment banking revenues and the state of capital buffers and credit reserves.

Here at PYMNTS, we dig into the management commentary and the filings to find out about the state of consumer spending.

Digging into those materials, PYMNTS also finds some illumination on the state of corporate spending and loans, which can be a read across for how they view their own business prospects (and interact with their supply chains), and the state of commercial credit.

Generally speaking, and in similar fashion to the consumer, enterprises are still using their cards to get what they need, though spending has been a bit muted. PYMNTS Intelligence data has detailed in recent months that headed into this year, Main Street businesses saw growth that exceeded GDP growth for the first time in two years.

Modest Spending Growth

American Express said in its earnings report last week that its commercial billed business — a measure of spending and cash advances — was up 2% year on year in the June quarter, to $132 billion. Spending was flat from larger companies, and smaller enterprises spent 2% more on their cards than had been seen last year. Spending on goods and services was 1% higher, year on year. And, as might be expected with the much reported snapback in business trips, travel and entertainment spending gained 3%.

CFO Christophe Le Caillec said on the call that spending from the small- to mid-sized enterprises was “modest.” International card services was up 13%.

“We continue to see double-digit growth in spending from … international SME and large corporate customers, and we are also seeing double-digit growth across all regions,” the CFO said on the conference call with analysts.

CEO Steve Squeri said on the call that small business and commercial spending within that international designation was up 14%. Corporate net write-off rates, the filings show, were 0.6%, steady with last year’s rate, and up from 0.5% in the first quarter.

“We feel good about where we are right now,” Squeri said.

Citigroup’s filings reveal that corporate deposits with the bank were $830 billion, on average, in the latest quarter, flat with the previous quarter and down 1% from last year. The financial supplement noted that commercial card spending volumes were $18 billion in the most recent quarter, up 7% from the first quarter and up 4% from a year ago.

CEO Jane Fraser noted on the call that the company’s treasury and trade solutions segment loans were up 3% to $81 billion from a year ago, driven by “increased activity in cross-border payments and in commercial cards. Average loans were up 3%, primarily driven by continued demand for export and agency finance, particularly in Asia, as well as working capital loans to corporate in commercial clients in Latin America and Asia.”

With mention of CitiDirect, she said: “We’re moving $5 trillion roughly per day for those clients around the world.”

JPMorgan’s payments-related revenue for its commercial and banking operations was $4.5 billion, up about $80 million sequentially.

CFO Jeremy Barnum said on the call that “demand for new loans remains muted as middle market and large corporate clients remain somewhat cautious due to the economic environment and revolver utilization continues to be below pre-pandemic levels. Also, capital markets are open and are providing an alternative to traditional bank lending for these clients” as average client deposits were up 2% year on year and relatively flat sequentially.

Goldman Sachs’ CEO David Solomon noted during his firm’s conference call with analysts that in terms of lending activity, leveraged finance is being combined with Goldman’s “powerful direct lending private credit platform … the size and the scope of the companies that are out there that have to be refinanced, recapitalized, sold, changed hands … bodes well over the course of the next three to five years.”

The supplementals reveal that transaction banking-related revenues through its platform solutions segment were $70 million, down 15% on lower average deposit balances.

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