Big U.S. banks see higher net interest income as rates rise

div classBodysc17zpet90 cdBBJodivpBy Elizabeth Dilts Marshallp

pNEW YORK Reuters – Wells Fargo & Co and JPMorgan Chase & Co reported a rise in net interest income in the first quarter, as the U.S. Federal Reserves rate hikes help their breadandbutter business –taking deposits and lending.pdivdivdiv classBodysc17zpet90 cdBBJodiv

pThe Fed raised rates by a quarter point in March to a 0.250.5 range, and has flagged another halfpoint move on May 4. p

pThese moves, aimed at tackling soaring inflation of 8.5, are expected to bring an end to the low interestrate environment that banks have faced for most of the past decade, particularly through the COVID19 pandemic. p

pThat should be good news for net interest income, a closely watched measure of how much money banks make from lending. It declined during the pandemic due to interest rate cuts and a drop in borrowing, but is now ticking up.p

pWells Fargo & Co led the pack, with net interest income for the first quarter rising 5 from a year ago. The bank also lifted its expectations for 2022, saying net interest income NII percentage growth could hit the midteens.p

p“In January, we thought NII would be up about 8. We‘re almost doubling that to kind of the midteens … due to the loan growth we’ve seen, as well as the substantial move in rates,” chief financial officer Mike Santomassimo on a call with analysts. Overall loan growth was 3. p

pThe NII from JPMorgan Chase & Cos core banking businesses, excluding the markets business, increased 9 from a year earlier, the bank said on Wednesday. Total NII is expected to be more than 53 billion for 2022, the bank said, roughly in line with its February guidance.p

p“NII is going to get much better. Things are going to normalize,” chief executive Jamie Dimon told analysts. p

pThe bank is still running the numbers and expects to give updated guidance on NII revenue at the banks investor day on May 23, chief financial officer Jeremy Barnum said. Analysts expect the bank to revise its guidance upwards. p

pStill, some banks said the outlook for rising interest rates is not all rosy. Higher rates could weaken economic growth, crimp lending overall and discourage some companies from transactions that generate fees.p

pCitigroups NII grew 3 over the first quarter of last year, but its Chief Financial officer Mark Mason, when pressed by analysts, said it was too soon say what higher rates will mean for Citigroups revenue this year. He left its revenue guidance at up by a “low singledigit” percentage.p

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pp Additional reporting by David Henry Editing by Michelle Price and Chizu Nomiyamap

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