The latest round of quarterly reports at the biggest American banks kicked off with a bang this week as JPMorgan Chase 's third-quarter results revealed net profit of $9.4 billion, double what was made in the previous quarter. Earnings from the firm's consumer and community banking activities stood at $3.9bn, a fall of nine percent year on year, but a distinct improvement from the previous quarter, which had seen that business go into the red. Pandemic-related payment deferrals on consumer loans (including mortgage and auto) were down by more than half since June and now come to a mere 3.4 percent of the consumer loan book, with only eight percent of the once-deferred loans not current as of the end of September. Citing the risk of a double-dip recession and the potential damage to small business and laid-off workers, chief executive Jamie Dimon appealed to federal lawmakers for a "good, well-designed stimulus package".
Citigroup meanwhile reported a slight fall in revenue from its retail banking activities, including its branded-card business, where revenues declined 12 percent on reduced spending (down ten percent) and closed accounts (which have reached four percent). The lender however felt able to lower provisions for bad loans as conditions have improved from earlier in the year and also saw headline numbers improved by its trading operations. Wells Fargo stood apart from its consumer-facing rivals in the extent of its year-on-year profit drop: down by 56 percent as opposed to the 35 percent reported by Citigroup and the 16 percent from Bank of America. The costs and restrictions stemming from its 2016 sales scandal still dog Wells, limiting its freedom in the marketplace while falling interest rates make the prospect of growing its profits more distant.
Bank of America 's reliance on deposits means that the zero-rate policy now in place for the foreseeable future makes it much harder for banks of its kind to develop a profitable spread. Even allowing for the pandemic's impacts, its results, with total revenue of $20.45 billion, disappointed Wall Street. During the lockdown, the now 116-year-old bank was one of the financial institutions that took in the most deposits from consumers wary of discretionary spending in uncertain times: a mixed blessing in the current economic environment. A useful contrast is provided by Goldman Sachs, possessor of a small consumer deposits operation compared to the likes of BofA: according to its latest quarterly accounts, Goldman's overall profit almost doubled, a performance attributable to the trading boom. Where once it felt the need for consumer retail so keenly that it created digital bank Marcus (whose deposits rose by 4.3 percent in the third quarter), now its lack of exposure to household budgets is proving fortuitous.
Turning to worldwide developments this week, the ongoing process of consolidation in Saudi banking has now led to the merger, announced on Sunday, of National Commercial Bank and Samba, in which Citibank held a 20 percent stake until 2004. The combined entity will have $223 billion in assets on its balance sheet and should be well placed to take advantage of the modernisation wave currently underway. The kingdom's Vision 2030 plan has been steadily transforming payments and consumer banking, as tracked in our latest Saudi Arabia cards and payments report, with a reduction in cash and radically increased utilisation of payments cards among the key objectives. Late last year, the government gave the green light to the establishment of a national payments company: Saudi Payments will be tasked with the creation of a payments infrastructure to serve banks and fintechs alike.
To end, links to some other stories of interest this week...
Australia, NZ: UnionPay introduces QR Code solution
Nigeria: Stripe acquires Paystack to expand into Africa
UK: PayPal launches interest-free BNPL: Pay in 3
UK: Plan for shops to offer cashback without a purchase
US: Regulators battle over fintech charters
The Weekly News Digest from Verisk Financial Research highlights significant developments that have recently occurred in payment cards, digital payments, acquiring, processing, retail banking and consumer credit. Our writers and researchers frame these items in contexts such as historical, sectoral and regional trends, adding a layer of value that is often missing from the rolling news cycle.
About Verisk Financial Research
The market-leading online, interactive database and data dashboards covering the global cards and payments industry in detail, plus a range of data-packed country and regional reports. Leveraging financial cards data going back to 2010 – and forecasts up to 2022 – our unique datasets cover 72 countries around the world and feature more than 250 metrics per market.