BIG BANKS IN TROUBLE - Banks Show Signs Of Bad Economy Coming

Big Banks In Trouble - banks show signs of bad economy coming. Goldman Sachs, Morgan Stanley, and Citi layoffs are mounting, and JP Morgan prepare for decreasing revenue.

CORRECTION: Twice I mentioned the date 2020 meaning 2022

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Banks themselves are hurting. Goldman Sachs just launched its biggest cost-cutting efforts since the 2008 financial crisis, laying off 3,200 employees (or 6.5% of its entire workforce) this week. And it’s not the only one reducing headcount: Morgan Stanley and Citi are among the other global banks that have trimmed their workforce recently as business slowed due to the Fed’s rate hikes. Overall, big banks’ profits are expected to have dropped 15% in Q4 from the year before.

But it’s not the apocalypse. Rising rates can benefit banks—as lenders, they make more money when they can charge higher interest to borrowers. Of course, banks also need to pay out interest to their depositors, too, but the gap between their lending profits and their depositor payouts (known as the “net interest margin”) is expected to widen—at least for now.

Consumer watch: Pay attention to how much banks have set aside to cover defaults on mortgage, auto, and credit card loans. That’ll give us a peek into how American consumers are dealing with inflation (so far, pretty good, banks have said).

Big picture: Given the tumultuous economic environment, companies reporting earnings will face lower expectations than any college football team playing against Georgia. S&P 500 earnings are projected to have gone negative in Q4 for the first time since summer 2020.—NF

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#recession #economiccollapse #economiccrisis