The media reports that new reports on the performance of the largest banks in the United States will contain data according to which these lenders have received income from lending which is the lowest for the last two years.
In the coming weeks, information will be released about the earnings of such giants of the US banking sector as JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo. According to the information, released by the media on Tuesday, October 8, these data will testify that the combined net interest income of the mentioned creditors is just under $62 billion. It is worth clarifying that in this case the reporting information for the last quarter is meant. Moreover, the expected figure reported by the media is almost 5% lower than the result of a year ago.
Net interest income reflects the difference between what financial institutions pay on deposits and what lenders take in from assets such as loans. Two years ago, the corresponding indicator turned out to be on a growth trajectory. The appropriate tendency was related to the fact that the Federal Reserve sharply hiked interest rates as part of efforts to counteract inflation. Against this background, banks began to increase rates for savers at a slower pace than rates for borrowers.
The situation for financial institutions has changed this year. As a result of the fact that banks slowly raised rates for savers, the profit margin decreased. According to analysts interviewed by the media, the net interest income of the above-mentioned four largest US lenders for the last quarter will be fixed at the mark, which is the lowest since the end of 2022. They also predict that the total net profit of these financial institutions for the specified period will decrease by an average of 15% year-on-year.
Saul Martinez, a banking analyst at HSBC, said during a conversation with media representatives that lenders’ earnings reports will be a harbinger of net interest going forward into the end of the current year and 2025.
It is worth noting that there is currently competition in the United States between large financial institutions belonging to the category of traditional banks and neobanks for servicing households earning $50,000 or less per year.
In the first half of last year, the share of digital lenders in new bank account openings in the US was fixed at 47%. It is worth noting that in 2020 the corresponding figure was 36%.
Currently, financial institutions belonging to the category of traditional banks, as part of the approach to gaining new customers for opening accounts, are based on the concept of expanding the physical footprint that has already existed for decades. Currently, these lenders are building branches where there were no such facilities before. For financial institutions belonging to the category of traditional banks, the appropriate approach generates new opportunities for competition for gaining households with low income.
There is also currently intense rivalry in the United States between standard lenders and credit unions. Moreover, this state of affairs applies to non-bank financial companies. In this case, it implies the competition of the mentioned firms with banks. Within the framework of the corresponding competition, the goal of each of the parties to the process is to gain customers who are representatives of small businesses.
Also, industry research data indicates that in the United States, 65% of banks and credit unions have formed at least one partnership in the financial technology area. Besides, 75% of US lenders characterize cooperation in the fintech sector as the main one to meet customer expectations.
As we have reported earlier, Tensions Rise Between UK Banks and Tech Companies.
