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JPMorgan Chase & Co. on Friday reported a double-digit percentage gain in outstanding credit card balances as not a sign of trouble, but an indicator of normal trends returning as the effects of the COVID-19 pandemic continue to fade.
JPMorgan Chase
JPM,
executives summed up the state of consumer credit quality as “normalization not deterioration” although a mix of factors continue to cloud their economic outlook, as part of the bank’s stronger-than-expected second-quarter results.
The comment reflects that the ability of the bank’s customers continue to pay back their debts at expected levels, and that credit quality is not getting any worse at the moment.
As a window into U.S. consumer activity, JPMorgan Chase’s jumbo-sized credit card business and auto unit booked a 5% increase in revenue to $5.29 billion with a boost from high card services net interest income, higher revolving balances and offset by lower auto leasing.
Card outstandings rose 18% as a result of “revolved normalization” as well as new account growth. Auto-loan originations were up 71% to $12 billion.
“For now consumers are slowly using up their cash buffers, core inflation has been stubbornly high, increasing the risk that interest rates go higher, and stay higher for longer,” CEO Jamie Dimon said in a statement.
Quantitative tightening by the U.S. Federal Reserve remains another uncertainty, given that such as effort “of this scale has never occurred,” Dimon said.
At the same time, fiscal deficits are large, and the war in Ukraine continues, which presents not only a humanitarian crisis but also has “large potential effects
on geopolitics” and the global economy, he said.
Still, the U.S. consumer continues to surprise on the upside, CFO Jeremy Barnum said on a conference call with analysts.
All told, net charge-offs, which reflect the difference between gross charge-offs and any recoveries of delinquent debt, rose $640 million to $1.3 billion, with contributions from card services, and changes in macroeconomic factors, as 30-plus day delinquencies have returned to pre-pandemic levels, as expected, the bank said.
Auto loan originations rose 71% to $12 billion, as competitors moved away from the space and inventories continue to slowly recover, the bank said.
Wells Fargo & Co.
WFC,
issued similar comments on their charge-offs for credit cards.
“Net charge-offs have continued to increase from historical low levels, but overall credit quality was strong and consumer and business balance sheets remain healthy,” the bank said on its conference call with analysts.
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