December 6, 2023


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Interest rate hikes threaten recession and job losses but boost profits of major banks

6 min read
Interest rate hikes threaten recession and job losses but boost profits of major banks

The interest rate hikes by the US Federal Reserve have led to financial turbulence, hit consumer spending, threatened to induce a recession and thrown millions out of work, increased costs for home buyers and, because of their international flow-on effects, increased the debt burden on poorer and low-income countries around the world.

But the major US banks, which dominate the American financial system, are raking in the money.

JPMorgan Chase, the largest bank in the US, last week announced a 52 percent increase in its first-quarter profits and record revenues.

Other major banks, Citigroup and Wells Fargo, also announced profit increases, benefiting from the Fed’s interest rate hikes, which enabled them to lift their rates on loans.

As the Wall Street Journal reported:

Together the three banks reported more than $22 billion in profits, up by more than a third compared with a year ago. Combined revenue was more than $80 billion, up 19 percent from a year ago. All three banks beat Wall Street expectations for per-share earnings and revenue.

JPMorgan’s net interest rate income—the difference between what it makes on loans and what it must pay depositors—rose by 49 percent to a record $20.71 billion. At Wells Fargo, it rose by 45 percent and at Citigroup by 23 percent.

In 2023, JPMorgan expects to take in $81 billion in net interest rate income, an increase of $7 billion on its forecast just three months ago.

Jamie Dimon at the JPMorgan Healthcare Investment Conference. [Photo by Steve Jurvetson / CC BY 2.0]

Bank of America has also joined the profit bonanza. Yesterday, it announced a profit of $8.2 billion for the first quarter, an increase of 15 percent. It benefited from the rise in interest rates as well as an increase in trading because of the turmoil in financial markets set off by the collapse of Silicon Valley Bank.

But even though its profit results beat market expectations, which had been for a decline, BofA wants more, announcing that it will cut as many as 4,000 positions from its payroll, representing around 2 percent of its workforce, which it said would be mainly achieved through attrition.


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