Clients of giant US banks are increasingly nervous about growing trade tensions, but are not yet significantly curtailing business activity due to the uncertainty, banks said on Friday after reporting mixed earnings.
“There are unpredictable outcomes when you start skirmishes like this with multiple countries,” JPMorgan Chase & Co chief executive Jamie Dimon said.
“It’s a worry,” he told reporters in a conference call, but added: “I don’t know if I’d use the word ‘major’ yet.”
Citigroup Inc chief financial officer John Gerspach agreed with his counterparts that the concerns are not yet driving business decisions.
“When you get into this kind of rhetoric, it does impact sentiment,” he said. “It’s going to slow down decisionmaking in some cases, but that hasn’t translated yet into anything we’ve seen.”
Gerspach said that Citigroup has seen an uptick in activity within Asia that could pick up further if the US-China clash worsens.
The company has hired additional staff for China desks in India and South Korea, he said.
The comments came as the two major US banks reported earnings that easily topped analysts’ expectations, in contrast to slumping Wells Fargo & Co, which badly underperformed forecasts.
The banks are among the first major companies to report results in what is expected to be a strong second-quarter earnings season thanks to US tax cuts and a humming US economy.
However, a series of trade battles launched by US President Donald Trump against key trading partners, including China and the EU, have clouded the overall business outlook.
Another worry particular to bank stocks is whether the benefits from higher US Federal Reserve interest rates are ebbing.
Higher interest rates boost bank profits by allowing them to charge more for loans.
However, as rates continue to rise, banks must also pay more to depositors.
JPMorgan, the US’ biggest bank by assets, reported an 18.3 percent surge in net income in the second quarter from the same period last year to US$8.3 billion. Revenues came in at US$28.4 billion, up 6.5 percent.
Highlights included increases in net interest income following two Fed rate hikes this year and a rise in overall loans compared with the same period last year, a sign of strengthening economic conditions.
Citigroup’s profits jumped 16 percent in the second quarter to US$4.5 billion, due to overall loan growth and lower tax payments. Both of the group’s main divisions, global consumer banking and institutional client services, had higher profits.
Revenues came in at US$18.5 billion, up 2 percent from last year.
The big laggard was Wells Fargo, which still has not completely found its footing following a fake accounts scandal that surfaced in 2016, prompting numerous fines, government probes and lawsuits.
Net income fell 11.4 percent to US$5.2 billion, and there was a drop in overall deposits and loans. On the positive side, the company notched an increase in net interest income, indicating that it also benefited from higher interest rates.
“During the second quarter, we continued to transform Wells Fargo into a better, stronger company for our customers, team members, communities and shareholders,” Wells Fargo chief executive Tim Sloan said.
JPMorgan shares finished down 0.5 percent in New York on Friday, while Citigroup dropped 2.2 percent and Wells Fargo 1.2 percent.
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