US Banks Sound Alarm On Lower-Income Struggles Before Election
Major U.S. banks have cautioned in their second-quarter results that lower-income customers are experiencing financial strain just months ahead of the presidential election.
JPMorgan Chase & Co. (NYSE:JPM), Citigroup Inc (NYSE:C), Wells Fargo & Co (NYSE:WFC), and Bank Of New York Mellon Corporation (BNY) (NYSE:BK) highlighted concerns over reduced savings and increased costs among consumers, reported The Financial Times.
Government stimulus programs during the COVID-19 pandemic initially shielded Americans from inflation, but as households have depleted these funds, the state of consumer financial stability could significantly impact November’s presidential election outcome.
Consumer sentiment, as indicated by the latest University of Michigan survey, has dropped to an eight-month low of 66, reflecting persistent cautiousness among consumers, the report added.
Profits at Citigroup’s U.S. consumer lending division, which encompasses credit cards, dropped by 74% compared to a year ago.
Mark Mason, the bank’s CFO, noted a general slowdown in consumer spending, with account balances now below pre-COVID levels.
JP Morgan Chase’s financial chief Jeremy Barnum said the bank’s broad take is that the consumer is fine but pointed to liability among less affluent customers.
BNY CEO Robin Vince cautioned that inflation is significantly burdensome, especially for those without savings.
The concerns expressed by bankers regarding lower-income Americans echoed a caution from Pepsi on Thursday, highlighting the impact of inflation over several years on lower-income consumers in North America. PepsiCo CEO Ramon Laguarta noted that many households perceive and experience higher food costs, forcing consumers to make careful spending decisions.
JPMorgan, Citi, Wells Fargo, and BNY, among the largest U.S. banks, reported reduced income from lending, as the sector stabilized following substantial gains from the Federal Reserve’s interest rate hikes. Initially, banks profited by charging higher loan rates without immediately raising savings rates, which bolstered profits.
However, they are now gradually increasing rates for depositors, The Financial Times added.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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