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What the Banks Say

On Friday a lot of large banks reported earnings. I have read through pretty much all of those transcripts this weekend.

None of the comments I hear from the banks are particularly concerning.

Which brings me to the question I have? Do banks usually not see what is oncoming until it is too late? Maybe they are not leading or coincident indicators?

I see a lot of comments about a impending crash. There is the longer run recession issue, but the more immediate one is that all this tightening by central banks is going to break something. Yet I don’t really hear it in these transcripts. Could the banks be so blind?

I really don’t know what the answer to that is. But they really don’t seem to see much of a problem, at least some far.


Credit quality largely unchanged, not seen any meaningful deterioration in credit

In regard to our view of the overall economy, we expect moderate growth in the fourth quarter, resulting in 1.8% GDP growth for the full year 2022


“Things are roughly the same” as 3 months ago

Health of US consumer: nominal spending still strong… both discretionary and non-discretionary are fine

Combined debit/credit spend up 13% yoy

Spending is growing faster than income

Banking system itself is “extremely strong” with “lots of liquidity”


Saw yoy credit growth “reflecting strong spending activity and lower payment rates”

“credit trends strong across the portfolio…credit quality remains strong”

“the current credit environment is benign. In fact, our net charge-off ratio in the third quarter remain near historic lows, and we are not seeing any meaningful early-stage metrics that causes concern.”

“would not be surprised to see an economic slowdown develop at some point”


“There is accumulating evidence of slowing global growth, and we now expect to experience rolling country level recession starting this quarter.”

“The U.S. economy, however, remains relatively resilient.”

“while we are seeing signs of economic slowing, consumers and corporates remain healthy as our very low net credit losses demonstrate, supply chain constraints are easing, the labor market remains strong.”


“While we’re closely monitoring trends with economic conditions expected to weaken given inflation, geopolitical instability, energy price volatility and rising interest rates, our customers continue to be resilient with overall strong credit performance and solid cash flow”

“we continue to closely monitor activity by segment for signs of potential stress and for certain cohorts of customers”

“continued high inflation has kept the Federal Reserve aggressive with rate hikes, leading the housing market to slow rapidly and the heightened uncertainty about the economic outlook and geopolitical events caused the financial markets to be volatile. However, labor demand remains robust, consumer balance sheets remain healthy, and customers have capacity to borrow. Overall, our consumer deposit customers’ health indicators, including cash flow, payroll and overdraft trends, are still not showing elevated risk concerns”Overall, our consumer deposit customers’ health indicators, including cash flow, payroll and overdraft trends, are still not showing elevated risk concerns”

Out of curiosity, I went back and looked at the comments of banks during the summer of 2008 on their Q2 conference calls. A couple of takeaways. First, they didn’t see the complete collapse of the financial system that was about to occur in ~4 months. But… second, they did see something coming. All the talk was tightening lending standards, credit weakening, a pullback in spending, of course housing.

It was a very different tone than the Q3 calls so far.

While banks were not hinting at the calamity brought about by Lehman, they were seeing conditions that were clearly quite tenuous.

This is a very different tone than we have right now.

One Comment Post a comment
  1. ijw z #

    As a perma bull I can only approve of this message.

    October 17, 2022

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