Major US banks reported solid loan and deposit growth in the third quarter, but lenders are paying a premium to retain customer funds in a fiercely competitive, high-interest-rate environment. JPMorgan Chase, Citigroup and Wells Fargo all posted higher net interest incomes on Tuesday, defying concerns that soaring bond yields and elevated borrowing costs would stifle loan demand and trigger a flight in deposits. "The consumer remains one of the economy's most important sources of resilience though higher prices continue to weigh on consumer sentiment," a Wells Fargo executive said in a post-earnings call. Citigroup reported an 11 percent increase in average deposits and a 12 percent jump in average loans. Wells Fargo saw average deposits rise 10.7 percent, alongside an 11 percent jump in average loans buoyed by its consumer banking division. Meanwhile, JPMorgan, the largest US lender, reported a 4 percent rise in average deposits and a 2 percent increase in loans from a year ago. Despite resilient metrics, banks face mounting funding pressures. As US Treasury yields hit record highs in the third quarter, customers sought better returns elsewhere, forcing lenders to raise deposit rates to prevent outflows and squeezing their margins. This was exemplified by JPMorgan's deposit margin that fell to 2.78 percent in the third quarter from 2.79 percent in the year ago period and Wells Fargo's net interest margin on a taxable basis that slumped to 2.43 percent in the reported quarter from 2.61 percent in the year earlier. "Loan and deposit growth continue to chug along, albeit maybe with some concern on deposits and how much is left over for the rest of the reporters," said Truist analyst Brian Foran. So far, analysts said there have been no significant cracks in overall bank credit quality, suggesting households have continued to manage their debt obligations. A weakening labour market and rising living costs could pressure borrowers, especially if prolonged conflicts drive up prices for essential goods and squeeze discretionary spending. Despite concerns that rising consumer spending is merely a reflection of inflation crowding out non-essential purchases, internal data does not show consumers shifting away from discretionary items, JPMorgan CFO Jeremy Barnum said in a post-earnings call. US consumer prices rose 3.4 percent in the 12 months through August, matching July's increase, while a key measure of underlying inflation posted its largest monthly gain in four months. Meanwhile, US job growth slowed more than expected in September. Sharp downward revisions to payrolls in previous months also added to uncertainty about the economic outlook and the potential strength of future loan demand. Wells Fargo and Citigroup increased their provision for credit losses in the third quarter, a trend the other banks might soon follow in the current macroeconomic landscape. In September, major US banks raised their prime lending rate following the Federal Reserve rate hike that raised borrowing costs for consumers and businesses. (Reuters) Edited by Cecil Wong

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Wall Street stocks were finished lower on Tuesday, as chip stocks added to recent losses and investors parsed mixed quarterly results from Citigroup and other big US banks. The PHLX chip index fell 0.2 percent, down for a fifth straight session, after Broadcom CEO Hock Tan on Monday likened some of the investment flow into the sector to "casino gambling." Micron Technology lost 3.6 percent and Applied Materials dropped almost 7 percent. Broadcom rose 0.7 percent. Citigroup dipped 5.6 percent and Goldman Sachs lost 0.2 percent after both banks topped profit estimates. Wells Fargo fell 3.1 percent after its net interest income missed estimates, while JPMorgan Chase ended down 0.9 percent following a rare profit miss. Apple hit an intraday record high of US$348.15 before closing up 0.1 percent at US$341.27, putting its stock market value at US$4.98 trillion. Analysts on average see S&P 500 third-quarter earnings surging over 30 percent, fueled largely by AI-related technology companies, according to LSEG data. Expectations of a strong earnings season have offset worries about the US war with Iran, surging bond yields and inflation related to high oil prices. "A lot of investors are feeling a sense of relief that markets might start looking at earnings and less at the bond market, less at higher-for-longer oil prices and less at high interest rates," said Jake Dollarhide, CEO of Longbow Asset Management in Tulsa, Oklahoma. The S&P 500 declined 0.02 percent to end the session at 7,805 points. The Nasdaq declined 0.2 percent to 27,204 points, while the Dow Jones Industrial Average declined 0.4 percent to 51,670. (Reuters) Edited by Cecil Wong