JPMorgan and Citi Report Resilient US Consumer Despite High Rates

Key Takeaways:

• Top US banks report a healthy consumer with strong spending on travel and dining.
• Credit card delinquencies are rising but remain at manageable levels.
• Bank CEOs acknowledge a “normalization” in credit, which was expected.
• The outlook remains cautious due to geopolitical risks and inflation.

Despite the Federal Reserve’s aggressive interest rate hikes, America’s largest banks—JPMorgan Chase and Citigroup—are reporting a surprisingly resilient consumer. Their latest quarterly results show continued spending strength, even as some retailers warn of strain.

Bank CEOs Paint a Picture of Consumer Health

JPMorgan CEO Jamie Dimon struck an optimistic note following the bank’s Q4 results.

“The consumer is in good shape. Wages are going up and people are employed,” Dimon said.

Citigroup CEO Jane Fraser echoed this view, noting a shift in spending patterns but overall health.

“The consumer is in good health,” Fraser stated, acknowledging a normalization in spending.

This contrasts with recent warnings from major retailers like Macy’s and Dollar General, which have highlighted pressure on lower-income shoppers grappling with high essential goods prices.

Strong Spending Masks Rising Delinquencies

The data from the banks supports their leadership’s statements. JPMorgan’s card sales volume grew 8% year-over-year in Q4, while Citi’s branded cards revenue jumped 12%. Both institutions cited robust demand in travel and dining.

However, signs of stress are emerging. JPMorgan’s credit card net charge-offs increased to 2.62% from 1.47% a year ago. Citi’s North America card net credit losses rose to 2.83% from 1.71%.

“We are seeing a normalization in credit. That’s exactly what we expected,” Fraser commented on the trend.

Bank executives emphasize that while delinquencies are climbing from historic lows, they remain within manageable ranges.

Cautious Outlook Amid Economic Uncertainty

The banks’ reports arrive as the Fed signals a potential pivot to rate cuts later this year, following 11 hikes since March 2022.

Dimon expressed ongoing caution about the economic road ahead, pointing to external risks.

“I’m still cautious. We don’t know what the full effect of quantitative tightening is going to be,” he said, referencing geopolitical tensions and persistent inflation.

For the moment, however, the core message from Wall Street’s giants is clear: the American consumer, a key driver of the economy, continues to spend.

“The consumer is in good shape. They’re spending money,” Dimon concluded.