Inflation Weighs on Nation’s Largest Banks

Stubborn inflation is taking a toll on the nation’s largest banks.

On Friday, Citi, JPMorgan Chase and Wells Fargo released earnings that were stuttered with indications that despite recent signs of cooling inflation the economy continues to be a drag. JPMorgan and Wells Fargo reported that their overall deposits fell and they had to hike the average interest rates on checking and savings accounts — good news for borrowers but not for the banks themselves.

Major banks, like other investors, have had to contend this year with high interest rates. While higher rates help lenders by allowing wider potential profit on loans, they also deter customers from taking on new debt, a big source of revenue for banks.

Indeed, Wells Fargo’s shares fell steeply when the market opened, as the bank reported that its net interest income — a closely watched financial metric that essentially measures how much money it makes from lending — fell 9 percent, to $11.9 billion. Loan demand from businesses “remained tepid,” said Charles W. Scharf, the bank’s chief executive.

The bank reported profit of $4.9 billion, down slightly from a year earlier, on revenue of $20.7 billion, up 1 percent from last year.

Citi warned that its poorer clients in particular were suffering. “We’re watching very closely the impact of inflation and the impact of interest rates” on lower-income customers, Citi chief financial officer Mark Mason told reporters. Despite reporting higher-than-expected profits, the bank’s shares also fell in morning trading.

Across the three major banks that released results on Friday, the business of catering to Wall Street and so-called institutional clients — the white-shoe work of banking — has held up better than the ordinary savings and loans that make up the lenders’ consumer arms.