‘Super Friday’ crunch for top US banks after market turmoil

Three of America’s biggest lenders will this week unveil bumper profits in a ‘super Friday’ of results after a number of bank collapses sent shockwaves through global markets.

JP Morgan Chase, Citigroup and Wells Fargo will disclose to what extent they have benefited from a flight to safety as spooked depositors move their cash from smaller, financially weaker lenders.

They will also show to what extent the major banks benefited from a ‘flight to safety’, as spooked depositors are thought to have moved their cash from smaller, stricken lenders to JP Morgan and other established names.

The sudden failures last month of Silicon Valley Bank (SVB), Signature and Silvergate in the US, coupled with the dramatic demise and rescue of Credit Suisse, have put savers and investors on edge.

Although no more banks have gone to the wall in the past fortnight, many experts are still concerned the turbulence is far from over. These include Jamie Dimon, chief executive of America’s largest bank JP Morgan, who last week warned more shocks were likely in the years to come.

Warnings: Jamie Dimon, right, boss of the US’s largest bank JP Morgan

‘While this is nothing like 2008, it is not clear when this current crisis will end,’ he wrote in a letter to shareholders. ‘It has provoked lots of jitters in the market and will clearly cause some tightening of financial conditions as banks and other lenders become more conservative,’ he added.

One of the main problems has been in the bond – or government debt – market, where sudden rises in interest rates have hit prices.

This caught out banks which ploughed money into bonds when interest rates were at rock bottom.

But another key problem has been a loss of confidence, with collapses of smaller banks triggering huge sell-offs in finance stocks across the world for weeks after.

There are continued concerns about First Republic, another mid-sized regional US lender. Due to report results on Wednesday, it was thrown a £24 billion lifeline last month by a group of Wall Street banks led by JP Morgan. But that has failed to stop the slide in First Republic’s share price, which has been trading at record lows.

The US government is also under mounting pressure to raise the federal guarantee on bank deposits from £200,000 to shore up confidence in the financial system and prevent further bank runs.

In a controversial move, depositors at both SVB and Signature were repaid in full when their banks folded.

Stricter rules to stop bank runs could include forcing lenders to hold more cash to meet sudden surges in withdrawal demands.

The three major US banks reporting next week are expecting to reveal a mixed picture.

JP Morgan is forecast by City analysts to post profits of £10.7 billion, up from £8.5 billion last year and Wells Fargo – the third largest lender in the US – is in line to unveil earnings of £4.5 billion on Friday, from £3.6 billion last year.

But rival Citigroup, which has 6,000 employees in London and 3,000 in Belfast, is set to report profits of £3.8 billion in the first three months of this year, down from £4.8 billion in the same period of 2022.

This post first appeared on Dailymail.co.uk