JPMorgan Chase, Bank of America and Wells Fargo Earned Billions

The nation’s largest banks are churning out profits as interest rates remain high, even though the lenders have had to set aside billions of dollars to replenish a deposit insurance fund that was heavily depleted by a crisis among midsize banks last spring.

Profits for the fourth quarter of 2023 reported on Friday by JPMorgan Chase, Bank of America and Wells Fargo exceeded analysts’ expectations, and the banks, which together provide accounts for roughly a third of all Americans, each reported that their customers had kept up spending.

Citigroup, which is in the midst of a global restructuring, reported a net loss of $1.8 billion for the quarter, compared with a profit of $2.5 billion a year earlier. The bank had warned that one-time expenses from its efforts to pull back from countries like Russia and Argentina were proving costly. On Friday, it revealed plans to cut roughly 10 percent of its work force — or about 20,000 people — as part of a restructuring that its chief executive, Jane Fraser, outlined broadly last fall.

In the last quarter of 2023, JPMorgan earned $9.3 billion, or $3.04 per share, compared with $11 billion a year earlier. A special assessment by the Federal Deposit Insurance Corporation had reduced per-share earnings by 74 cents, the bank said. Analysts had been expecting per-share earnings of around $3.32, so investors considered the bank’s performance to be a win once the F.D.I.C.’s one-time bill of $2.9 billion was taken into account.

The bank’s revenue for the quarter was $38.6 billion. Compared with the same period a year earlier, revenue was 12 percent higher.

Unlike his counterparts at Bank of America and Wells Fargo, who appeared optimistic about the U.S. economy, JPMorgan’s chief executive, Jamie Dimon, warned that political leaders and investors might be underestimating the economic pain that lay ahead.

In a statement released with the bank’s earnings report, Mr. Dimon listed the wars in Ukraine and the Middle East, the U.S. infrastructure overhaul and rising health care costs as “significant and somewhat unprecedented forces” that could cause inflation — and therefore interest rates — to remain higher than investors are prepared for at the moment.

When asked on Friday why the bank was forecasting six rate cuts in 2024 while Mr. Dimon’s statement seemed to suggest something different, JPMorgan’s chief financial officer, Jeremy Barnum, said the bank used models to predict the rate cuts. “Beyond that, everyone has different views on rates, which they should,” he said.

Consumers and businesses faced the highest interest rates in more than 20 years as the Federal Reserve worked to tame inflation. The rise in rates touched off a crisis last March among midsize banks, causing three lenders to fail and a fourth to dissolve. Federal officials tapped into the government’s deposit insurance fund to make depositors at two of the failed institutions whole, and are now collecting roughly $16.3 billion to replenish the fund, relying on the largest banks to pay the most.

Bank of America’s profit shrank last quarter as it paid a $2.1 billion special assessment to the government fund that absorbs the cost of bank failures. It also recorded a $1.6 billion charge related to the discontinuation of the Bloomberg short-term bank yield index, a benchmark rate it adopted to replace the also discontinued London Interbank Offered Rate. That accounting adjustment will be mirrored in later quarters; the bank plans to factor $1.6 billion back into its interest income over the next few years.

Including those costs and adjustments, the bank reported a $3.1 billion profit for the quarter on revenue of $22 billion, down from a $7.1 billion profit a year earlier on revenue of $24.6 billion.

Brian Moynihan, the bank’s chief executive, described the quarter as a “solid” one, and praised the bank’s “good loan demand” and growth in customer deposits. Those have steadily edged up after the turmoil caused last year by the regional bank failures and by rising interest rates that sent investors in search of higher yields. Bank of America’s average deposits last quarter stood at $1.9 trillion, just a touch below its average a year ago.

Wells Fargo earned $3.4 billion on revenue of $20.4 billion, both up from a year earlier. The bank paid a $1.9 billion assessment to the government fund, and recorded $969 million for severance costs it expects to incur this year. It has not estimated how many jobs it anticipates cutting, and Michael Santomassimo, the bank’s chief financial officer, said the reductions would be broadly spread across the bank. He attributed the cuts to “efficiency work that we’re doing across the firm.”

High interest rates have helped fuel banks’ profits, and executives are bracing for the effects if the Federal Reserve, as expected, cuts rates. Wells Fargo said its net interest income could drop at least 7 percent this year. Charlie Scharf, the bank’s chief executive, said the bank was “sensitive” to interest rates and the overall health of the American economy, but he took an upbeat tone, saying credit quality remains strong, a sign of consumer resiliency.

Citigroup’s net loss included a $1.7 billion F.D.I.C. bill and an addition to the bank’s loss reserves to prepare for risks in Russia and Argentina, as well as the hit from the sudden devaluation of the Argentine peso.

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