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US bank execs warn government shutdown adds to economic risks
NEW YORK, Jan 16, 2019 (BSS/AFP) – Bank executives said Tuesday that
economic conditions remained solid but warned that weakening sentiment amid a
lengthening US government shutdown could kill growth.
Uncertainty about the shutdown — now the longest in US history — further
dims the outlook at a time when questions about trade wars and Federal
Reserve policies also are clouding plans, executives said.
“Some would estimate that if it goes on the whole quarter, it can reduce
growth to zero,” said JPMorgan Chief Executive Jamie Dimon as the partial
shutdown entered its 24th day.
“The shutdown is not going to help the economy,” Dimon said in a
conference call.
“The underlying statistics of the economy globally are not bad,” he said.
“There’s clearly a slowdown, particularly in Japan, China and Germany and the
US but there’s still global growth. And the consumers in good shape.”
Dimon’s remarks came as JPMorgan and Wells Fargo reported mixed results
for the fourth quarter, following a similar report Monday from Citigroup.
Citigroup Chief Executive Michael Corbat said the company could “make
adjustments” to plans if conditions weakened.
He described a “disconnect” between the growth fears that have disrupted
financial markets in recent weeks, and the tight labor markets, good consumer
confidence and other anecdotal signs of health.
“Right now we see the biggest risk in the global economy is one of talking
ourselves into the next recession as opposed to the underlying fundamentals
taking us there,” Corbat said.
Net income at JPMorgan surged 67 percent to $7.1 billion, with the year-
ago period hit by one-time accounting costs from US tax reform.
Revenues rose four percent to $26.8 billion.
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JPMorgan’s earnings got a lift from higher net interest income following
four Federal Reserve interest rate hikes last year, with the bank generating
higher income from credit cards and auto leases. The bank also notched an
increase in overall loans.
But the results translated to $1.98 a share compared with the expected
$2.21, a rare miss for the US giant, due in part to increased technology
spending and weakness in US Treasury bond trading amid market turbulence at
the end of 2018.
JPMorgan also set aside increased funds for bad loans. Chief Financial
Officer Marianne Lake described the extra provisions for credit losses as due
to “select” loans and not indicative of “systemic problems” with credit.
– Wells Fargo earnings slip –
Wells Fargo reported that fourth-quarter earnings slipped 1.4 percent to
$6.1 billion behind a 4.9 percent drop in revenues.
Net interest income rose during the quarter, but the bank saw a drop in
overall loans compared with the year-ago period, with declines in consumer
loans more than offsetting higher commercial loans.
The results again suggest Wells Fargo is continuing to face residual
skepticism from customers following a fake accounts scandal in which the bank
opened credit card and other accounts for customers without their knowledge.
Wells Fargo Chief Executive Tim Sloan said he was proud of
“transformational changes” at the bank, adding that “we have made meaningful
improvements to how we manage risk across the company.”
Shares of JPMorgan reversed early losses and ended up 0.7 percent at
$101.68, while Wells Fargo fell 1.6 percent to $47.67. Citigroup jumped 4.2
percent at $61.38.
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