Earnings season’s here, with JPMorgan among the most visible names reporting Friday morning (Jan. 12).
And the big bank’s metrics are showing evidence that consumer spending is still strong. But as management commentary on the call noted, spending may moderate as it outpaces any momentum in building up deposits. Credit losses are still in a projected range targeted in past earnings commentary.
Supplemental materials offered by the company alongside the earnings announcement reported that debit and credit spending was up 7% to $441 billion.
CFO Jeremy Barnum said that card loans were up 14% to $202 billion.
Credit costs were $2.2 billion, largely driven by net charge-offs, which were up $791 million year on year predominantly “due to continued normalization in card” credit metrics, said Barnum. The supplementals revealed that the card-related net charge off rate stood at 2.8%, up from 1.6% last year.
Average deposits were down 6% year on year, he continued, as “clients continue to opt for higher yielding alternatives.”
Looking ahead, he said, “we expect strong long growth in card to continue, but not at the same pace as 2023.”
JPMorgan expects the 2024 card net charge off rate to be below 3.5%, as average unemployment should be around 5.5% in the year ahead. “I think it’s uncontroversial that the economic outlook has evolved to include a significantly higher probability of a soft landing. That’s, I think, the consensus at this point,” said Barnum, who added that “consumers have been spending more than they’re taking in.”
It remains to be seen “how that spending behavior adjusts as we go into the new year in a world where their cash buffers are less comfortable than they were.”
In a nod to omnichannel efforts in banking, the CFO remarked that JPMorgan built 166 new branches and “we’re planning about a similar number this year,” as the company logged 2 million net new checking accounts and an 8% growth in active card accounts in the past year.
Asked on the call about technology investments, Barnum noted that investments are on the rise across the company, and that AI remains an area of promise, though “we’re JP Morgan Chase and we’re not going to be chasing shiny objects here in AI. We want to do this in an extremely disciplined way, very commercial and very linked to tangible outcomes.”
Active mobile customers were up 8% year on year to 53.8 million.
Investors sent the shares of the banking juggernaut up 1% in early morning trading on Friday.