The Best Reading on Consumer Spending and Sentiment Will Come out Tomorrow

Starting tomorrow, Wall Street will focus on how banks view inflation, the stock market and bond trading.

But as earnings kick off on Friday (Jan. 13), the marquee names in financial services — J.P. Morgan, Bank of America, Citigroup, Wells Fargo among them — also will offer insight, and a roadmap into credit performance on Main Street, and ongoing efforts to digitally transform financial services itself.

We’ll get commentary, of course, on the macro pressures that have hit all segments, and whether rising rates charged on loans and other products have offset higher rates paid on deposits.

Consumer and Credit are Top of Mind

Consumer spending will be top of mind, of course, especially how individuals and families are juggling household spending. As seen in JPMorgan’s last earnings report, debit and credit card sales volume was up 13% year on year to $395.8 billion, although that metric declined from the second quarter of this year, where spending was $397 billion.

Others have shown, in their own most recent reports, that consumer spending is at least slowing a bit. Bank of America’s supplementals showed that overall payment spend volumes were at 10% growth year over year, down from recent high teens (and above) gains. Citi revealed continued momentum in branded cards, where spend was up 14%.

Back in October, JPMorgan Chase CEO Jamie Dimon said there “are uncertainties” as to where consumer and small and medium-sized business (SMB) activity might be headed, including trends in deposit migration. Net charge-offs in the quarter were $679 million, up from $68 million in the second quarter and $188 million last year. The banks have been quick to point out that losses and reserves and delinquencies have been, by and large, at pre-pandemic levels. But with continued pressures of the paycheck-to-paycheck economy well-documented, and the fact that debt is more expensive than has been seen in years, we’ll look to see how these trends have fared in the most recent few months. Wells Fargo, for example, said in its most recent earnings that consumer net loan charge-offs are up $72 million to 40 basis points (BPS) of average loans, tied in part to loan charge-offs in the automobile lending segment.

Digital Transformation

Some of the names in the big banking pantheon have also been vocal about their efforts to move the needle on the digital transformation of banking itself. The banking giant has laid out a tech and digital investment roadmap that included more than $2 billion in spending in 2022 alone. Dimon had said on the latest call that the pace of spending would continue despite any macro headwinds.

As has been seen in the past several quarters, all of the banks have posted continued gains in mobile and digital banking customers. Information from JPMorgan showed that active mobile customers were up 10% to 48.9 million in the third quarter. Wells’ data revealed 3% growth in digital customers year over year. BofA’s mobile banking user roster grew by 7% over the same time frame, and the percentage of sales done through digital channels, the bank said, was 48% in the third quarter, up from 43% last year. Citi’s active mobile users soared 12% year on year.