NEW YORK, Dec 6 (Portal) – The biggest US banks are bracing for a deteriorating economy next year, executives said Tuesday as inflation threatens consumer demand.
JPMorgan Chase & Co (JPM.N) Chief Executive Officer Jamie Dimon told CNBC that consumers and businesses are in good shape, but noted that this may not last much longer as the economy slows and purchasing power slows the consumer will be undermined.
“These things could very well derail the economy and cause this mild to severe recession that people are worried about,” he said.
Consumers have $1.5 trillion in excess savings from pandemic stimulus plans, but these could expire sometime in mid-2023, he told CNBC. Dimon also said the Federal Reserve could pause for three to six months after raising interest rates to 5%, but that “may not be enough” to curb high inflation.
The US Federal Reserve raised interest rates by 75 basis points to between 3.75% and 4% during its fourth straight meeting last month, but it also signaled hopes it could soon switch to smaller hikes at its next meeting.
Big bank stocks fell sharply on the day after a number of top bankers outlined the risks to the economy. Bank of America slipped more than 4%; Goldman Sachs Group Inc (GS.N) and Morgan Stanley (MS.N) each fell more than 2% and Citigroup Inc (CN) slid more than 1%.
Bank of America CEO Brian Moynihan told investors at a Goldman Sachs financial conference that the bank’s research shows “negative growth” for the first half of 2023, but the contraction will be “mild.”
The lender’s investment-banking fees are likely to fall 55% to 60% year over year in the fourth quarter, while trading revenue is likely to rise 10% to 15%, Moynihan said.
“Economic growth is slowing down,” Goldman Sachs CEO David Solomon said at the same conference. “When I speak to our customers, they sound extremely cautious.”
In banking, the job market is “surprisingly tight” and competition for talent “as fierce as ever,” he said.
However, some banks are shedding staff. Morgan Stanley has shed about 2% of its workforce, a source familiar with the company’s plans said on Tuesday. The job cuts, first reported by CNBC, affect about 1,600 jobs and follow cuts at Goldman and Citigroup. Continue reading
Elsewhere on Wall Street, the world’s largest wealth manager BlackRock Inc (BLK.N) has frozen hiring of employees except for critical positions, Chief Financial Officer Gary Shedlin said.
“We’re trying to be a little more careful,” he said.
Reporting by Lananh Nguyen and Saeed Azhar in New York and Noor Zainab Hussain in Bengaluru; Additional reporting by Megan Davies and Carolina Mandl; Edited by Richard Chang and Stephen Coates
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