Consumer Spending Bolsters Big Bank Earnings

Trade wars?  Check.

Geopolitical fears?  Check.

And yet the consumer continues to spend, and just as importantly, to bank.

Wall Street may have been focused on trading revenues and warnings over interest rate cuts. But for those observers watching reports from Bank of America, American Express and others, one strong signal came from the continuing trend of spend.

In one example, for Bank of America, the U.S. consumer continued to drive results, where total credit and debit spend was up to $154 billion, and total consumer banking revenues gained five percent to $9.7 billion. Within those results, too, digital use continued to grow, with users up 10 percent to 27.8 million users, and digital sales were 25 percent of all consumer banking sales.

Technology remained a core theme, as Goldman Sachs, in its own earnings beat, has said that it continues to make “substantial” investments in digital platforms and where its online banking unit continues to make strides.

Similarly, JPMorgan said it will look to spend money on technology and even new branches as it targets to “spend to win,” as CEO Jamie Dimon noted on the post-earnings conference call with analysts. He said consumer spending remains strong.

JPMorgan said active digital customers were up 6 percent year-over-year and 1 percent sequentially to just over 51,000. Active mobile customers were up 12 percent year-over-year to more than 35,300. Management has said the bank has seen more than 2 million accounts opened through digital means.

In terms of the consumer, supplemental materials provided by the bank alongside earnings showed that credit card loans were up 8 percent year-over-year to $157.6 billion.

Card sales volume gained 11 percent from the year-ago period to $192.5 billion.

Capital One’s domestic card business showed that credit card loans increased 2 percent to $112.1 billion, an increase of $2.3 billion.

Executives on American Express’ earnings call noted that consumer spending continued even in the face of moderating economic growth, as loans on its cards were up 10 percent to $83.2 billion, and spending on its cards was up by mid-single digit percentages.

Amex execs said on the call that 70 percent of the new consumer cards acquired this quarter carry an annual fee, and card fee revenue grew 17 percent year-over-year and accelerated sequentially quarter-over-quarter. CEO Stephen Squeri said on the call that the company is “attracting next-generation consumers to the franchise, with our most recent U.S. consumer product refreshes more than 50 percent of our new card members are millennials or Gen Zers. I believe we have a long runway to continue this growth.”

Call it spending: the next generation?