JPMorgan, Citigroup and Wells Fargo report better-than-expected earnings

Given its size, JPMorgan in particular is a proxy for the banking industry in general. Jamie Dimon, the bank’s chief executive, has deep political connections, and his speculations about the economy are scrutinized in some circles as closely as central bank musings.

On Friday, Dimon told analysts he expects the US economy to see a “soft landing, a moderate recession, or a hard recession,” though he did not give a time frame for the predictions. “Obviously we hope for the best,” he said.

In its latest report, the bank listed a series of risks, including that consumers are burning through their stores of cash and that inflation remains high. Last quarter, JPMorgan lost $900 million on investments in US Treasurys and mortgage-backed securities, which fell in value as interest rates rose — but that was hardly an impact on its results.

Analysts are watching Wells Fargo, one of the nation’s largest mortgage lenders, for signs of economic stress. Charles W. Scharf, the bank’s CEO, said the US economy “continues to do better than many expected.”

The bank said on Friday that non-performing loans in its commercial business increased, but its consumer activity remained fairly flat, with a slight rise in credit card defaults offset by a decrease in auto loan losses. Commercial real estate, especially loans on office space, is a pain point, and the bank has set aside nearly $1 billion more for losses.

Unlike other banks, Citigroup reported a decline in second-quarter earnings, although the drop was not as severe as analysts had expected. “The long-awaited recovery in investment banking has not yet materialized, making for a disappointing quarter,” Citi CEO Jane Fraser said in a statement.

The three big banks reporting earnings on Friday have been all over the news this year, thanks to their prominent role in trying to be a stabilizing force during the spring banking crisis that brought down three smaller lenders. JPMorgan bought one of those failing banks, the First Republic. In a sign of just how upset that institution has become, JPMorgan said on Friday it has set aside $1.2 billion to deal with losses in the First Republic’s lending portfolio.

Analysts still expect the acquisition to eventually prove worthwhile, thanks to First Republic’s client base of wealthy clients and coastal affiliates, which Friday’s results show are already supporting JPMorgan’s asset and wealth management arms.

A standoff over US government debt limits in April and May was also reflected in the banks’ results, with Citi citing anxiety during negotiations that pushed investment bank clients to “sideline” during the second quarter.

In the next week or so, a slew of other banks will be reporting quarterly earnings. Among the most closely watched results are Wednesday’s results from Goldman Sachs, which has publicly hinted at a disappointing stretch, and regional banks like Western Alliance and Comerica, which are looking to prove they’ve recovered from their recent troubles.