Chase, Bank of America, Citi: 'Mild' recession coming with joblessness
With consumers receiving loans to sustain high levels of spending, interest rates and fees are being hiked up by banks as a result, fueling bank revenues and profits.
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Credit cards issued by Chase, Citi, and Bank of America (Frequent Miller)
Executives from JPMorgan Chase, Bank of America and Citigroup released statements on Friday on projecting a "mild recession" this year, alongside predictions of an incline in unemployment rates of 4.9%, 5.5% and 5%, respectively.
Bank of America CEO Brian Moynihan stated on behalf of the company that "a rapid rise" in unemployment is due to kick off this year, despite acknowledging that this outlook is "much more conservative than the economic estimates that are out there."
Read next: US: Unemployment benefits applications generally indicate layoffs
Credit loans benefit banks but hurt consumers
Consumer banking divisions such as credit cards, accounts and loans scored high numbers this quarter. Chase reported a net income of $4.54 billion, up 9.5% from a year before. Bank of America recorded a profit of $3.58 billion, up 14.5% from a year earlier. Shares from all three entities closed up over 2%.
With consumers receiving loans to sustain high levels of spending, interest rates and fees are being hiked up by banks as a resultو which tends to fuel bank revenues and profits. With that being said, credit loans skyrocketed 19% at Chase, which brought records back to pre-pandemic levels, and jumped 13% at Citigroup.
This projected rise could recede and have a devastating fall or crash if it continues the way it is now.
Recession is 'unavoidable'
The CEO of JPMorgan, Jamie Dimon, predicted back in October that the US economy will fall into recession within 6 to 9 months, citing a number of factors leading to this.
He posited that the Federal Reserve's strategy for dealing with inflation - which is running away from it - in addition to the unknown effects of quantitative easing and consequences of the Ukraine war are all exacerbating the situation.
“These are very, very serious things which I think are likely to push the US and the world - I mean, Europe is already in recession - and they’re likely to put the US in some kind of recession six to nine months from now,” Dimon said.
In that same month, Bloomberg economists Anna Wong and Eliza Winger forecasted in their latest recession probability models that there is an increased probability of recession over all timeframes, during which it will hit a downturn reaching 100% in October 2023 compared to 65% within a comparable period during the 12-month estimate.
