JPMorgan Chase, Bank of America and Wells Fargo earnings show the great, the bad and the ugly of individuals’s funds. So how are they holding up?

Friday’s wave of big-bank earnings gives a crucial glimpse into Americans’ funds amid high prices, rising rates of interest and recession worries. At first glance, most consumers look like keeping their heads above water.

A day after December inflation data showed price increases coming off the boil – but still high — fourth-quarter earnings showed some signs of consumer slowdown and strain, but not a wallet that’s coming apart on the seams.

Living proof: Bank of America’s
BAC,
+2.20%

consumer-deposit balances are showing “strong liquidity.” The bank’s consumer customers spent $4.2 trillion in aggregate last yr, a ten% yr over yr increase, he noted, based on a FactSet transcript.

But there are tentative signs of a weakening economy: these balances are “drifting down,” CEO Brian Moynihan said on an earnings call discussing the bank’s fourth quarter profits, “but they still have loads of cushion left.”

Earlier within the week, research from the Bank of America Institute said after strong spending in 2022 , consumers were easing into the brand new yr after having spent barely lower than 2021 on holiday-related items in November and December.

At JPMorgan Chase & Co.,
JPM,
+2.52%

the combined credit-card and debit spending for consumers and small businesses rose 9% year-over-year, said Jeremy Barnum, the bank’s chief financial officer, based on a FactSet transcript of the Friday earnings call.

“They’re generally on solid footing, although sentiment for each reflects recessionary concerns not yet fully reflected in our data,” Barnum said.

“The U.S. economy currently stays strong with consumers still spending excess money and businesses [are] healthy,” JPMorgan CEO Jamie Dimon said in a press release on the fourth-quarter earnings. What’s unknown, he added, is the last word toll of high inflation, diminished purchasing power and consequence of conflicts like Russia’s invasion of Ukraine.

“Our customers have remained resilient with deposit balances, consumer spending, and credit quality still stronger than pre-pandemic levels,” Wells Fargo
WFC,
+3.25%

CEO Charlie Scharf said in a press release on his bank’s results.

Banks put aside money for loan losses

Also Friday, one gauge of consumer sentiment jumped to a nine-month high as inflation cools and stocks show renewed strength. The index increased from a revised 59.7 in December, the University of Michigan said. Consumer sentiment remains to be weak, nonetheless. The index is well off a pandemic-era peak of 88.3 in April 2021 and a pre-pandemic high of 101.

Banks earnings usher in a parade of fourth-quarter earnings results for other industries within the weeks to come back. But additionally they help set the stage for the economic picture ahead.

Indeed, the earnings show the banks build up their stockpiles of cash to brace for potential loan defaults on all sides of the business, including those from consumer loans and bank cards.

“You probably did hear they’re increasing the provisions for loan losses,” said Quincy Krosby, LPL Financial’s chief global strategist. “Nonetheless, I wouldn’t say there are overwhelming concerns at this point regarding delinquencies or late payments.”

Delinquencies and defaults are inherently a part of a bank’s business, Krosby noted. But “at once, it’s not blinking red.”

When setting aside money for such loan losses, “the intent is to overestimate, not underestimate,” said Greg McBride, chief financial analyst at Bankrate.com. The cash that banks hold back for loan losses can at all times be used elsewhere once they think any economic storm has come and gone, McBride noted. “The position they don’t wish to be in is that they haven’t reserved enough.”

We wish to listen to from readers who’ve stories to share in regards to the effects of accelerating costs and a changing economy. In case you’d wish to share your experience, write to readerstories@marketwatch.com. Please include your name and the most effective option to reach you. A reporter could also be in contact.

Consumer debt is steadily increasing

Consumer debt loads are increasing, however the widespread shift into delinquency isn’t materializing for now. Aggregate debt balances, including mortgages, increased by 2.2% or $351 billion to $16.51 trillion as of the third quarter, based on data from the Federal Reserve Bank of Latest York.

Credit-card balances increased by $38 billion to $930 billion within the third quarter, a 15% year-over-year increase — the sharpest increase in greater than twenty years.

Still, the quantity of credit-card and car-loan debt shifting to the early stages of delinquency increased by roughly a 0.5 percentage point throughout the third quarter, which is similar increase throughout the second quarter, Latest York Fed researchers noted.

Read also: Are high automotive prices the brand new normal? In case you’re waiting to purchase a automotive, stand firm, experts say—it could repay.

The quantity of delinquent debt increased for nearly every type of debt and credit, but that follows “two years of historically low delinquency transitions,” the researchers said.

The banks will watch the job market closely for signs of stress and strain, Krosby said. A lost job might be a key trigger for falling behind on bills, Krosby and others have noted.

At the same time as news of layoffs mount in financial and technology sectors, the jobless rate fell to three.5% in December. That jobless rate was reached a pair times in 2019, and is the bottom since 1969.

“The labor market is crucial, and up to now the labor market has held up. It’s resilient,” Krosby said.

The Dow Jones Industrial Average
DJIA,
+0.33%
,
S&P 500
SPX,
+0.40%

and the Nasdaq Composite
COMP,
-1.10%

are all trading higher Friday afternoon.

After the worst yr for stocks since 2008, the Dow is up greater than 3% yr to this point while the S&P 500 is up nearly 4% and the Nasdaq is up greater than 5%.

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