We listened to the Q4 2022 earnings calls of the top 4 US Banks today

By Jeffrey Cohen, Investment Advisor Representative
US Advanced Computing Infrastructure, Inc.

Here is our initial, brief read on the US macroeconomic situation and the top banks generally. 

We saw deposits were weak, either because people are moving money to gain yield, or because they are spending their savings.

We saw loans rising, most likely because they are now more profitable for banks. More loan volume across the board.

Net Interest Income was significantly higher in Q4/2022 than for the prior quarters of the year, and prior years. Bankers said to be cautious to extrapolate Q4 into 2023, and expect 2023 Net Interest to be less than 4x 2022/Q4.

Most of the bankers have hedged or swapped out their asset sensitivity to low rates, or are consciously working through yield, duration and maturities to limit the impacts. Most bankers were happy to be investing at 3.5% when long bonds a year ago yielded much less.

There was significant less asset management and investment management fee revenue across the board. Assets under management (AUM) was weaker due to weak equities and bond markets. Also, there was little if any IPOs, Venture Capital spin outs, mergers and acquisitions, and likely (not mentioned) underwriting of new debt. This was a weak spot for all banks.  However, all four were investing in their asset management teams of people.

Net Charge-offs rose for all banks, and were rising, but still below pre-pandemic levels. We saw reduced credit quality in the consumer space, or what we called credit risk weakening.

All the banks had higher expenses. Some of the banks saw or expected increases in their operating leverage, while others did not. It did not matter, all banks were increasing their non-interest expenses.

The banks had various forecasts of the macro-economic and monetary policy situation in 2023. They all expected interest rates to rise in 2023, but the size of the raise was smaller. I seem to remember 0.75% or 75 basis points was a typical rise for 2023. The banks also expected a softening economy or light recession. I am trying to remember, but I think $JPM suggested unemployment would rise to 5.5%.

We also tweeted it out.

So much work to do...but I always take the morning each quarter to listen to the top 4 US banks $JPM $BAC $C $WFC for the US macroeconomic climate.

I hear less deposits, more loans, more NII, less M&A/VC/PE, credit risk weakening, & higher bank expenses.

— Jeffrey Cohen, Chicago Quantum (SM) (@chicago_quantum) January 13, 2023