Wednesday, November 30, 2022

Last month we had a post examining the evolving revenue picture at Citigroup ($C), and specifically how the bank’s net interest income vaulted upward this year while its non-interest income wilted like sauteed spinach.

This time around we decided to widen the lens. We performed the same exercise for 10 large consumer banks in the United States, tracking net interest income vs. non-interest income for the last 15 quarters. Figure 1, below, is the result.

As you can see, net income started to soar for these 10 banks at the start of the year. Non-interest income actually started drifting downward at the beginning of 2021, presumably after a flood of home refinancing deals that happened in late 2020 as interest rates were at rock-bottom prices.

How will that spread continue in 2023? Good question. Federal Reserve chairman Jerome Powell said on Wednesday that the Fed might decelerate the pace of its rate hikes, from 0.75 percent per meeting to 0.5 percent — but rate increases will continue, even at that potentially slower pace. Meanwhile, non-interest income is going down the tubes because home sales and mortgage refinancings are at a standstill; that’s not likely to change any time soon.

We’ll just have to wait and see what the next chart will look like.

(PS. The banks in our sample were Bank of America, Capital One, Citigroup, Citizens Financial, Fifth Third Bancorp, JP Morgan, PNC Financial, Truist, US Bancorp, and Wells Fargo.)

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