NEW YORK–The nation’s biggest banks saw big profits during 2019. JPMorgan Chase, the country’s largest bank, reported record profits, while Citigroup posted its best results since before the 2008 financial crisis. But a new survey of analysts also forecasts numerous challenges ahead for banks.
According to Chase, it earned $36.4 billion in 2019, an increase over the $32.5 billion in 2018, thanks in part to a strong $8.5 billion it earned during the final quarter (which was also a record). Citi posted a $19.4 billion profit for 2019, including $5 billion during Q4.
Analysts cited a turnaround in financial markets for the robust numbers for the biggest banks, as well as rate cuts by the Fed that helped push the markets to new highs.
One bank did post numbers that weren’t as rosy: Wells Fargo, which continues to deal with the fallout from numerous scandals, reported $2.9 billion in income for Q4, down from the $6.1 billion it reported for the same period in 2018.
The bank said it was setting aside $1.5 billion to pay legal costs, but did not explain why its fourth quarter performance trailed 2018 by such a margin. Wells Fargo continues to operate under growth prohibitions put in place by the Fed as part of its punishment.
Nevertheless, Wells Fargo distributed $9 billion to shareholders through dividends and share buybacks during 2019.
Plenty of Challenges
But there are plenty of challenges ahead for banks, according to a survey of industry analysts by GlobalData. GlobalData’s Retail Banker International asked leading industry figures for their views on the coming year, with profitability a consistent topic.
Here are some of the analysts’ responses:
- Madhur Kumar Jain, SVP/global head of Solution Consulting, SunTec Business Solutions: “With Challenger banks, fintechs and BigTechs leading the disruption drive, there is no looking back for the industry or the consumer. This pressure has actually made them [large retail banks] look inward, especially where they are struggling to meet profitability targets and keep margins, as well as not being boggled down by the legacy IT systems.”
- Ian Bradbury, CTO Financial Services, Fujitsu: “Banks will be facing a tough decision – whether to find opportunities to partner with digital-first non-banks, or to rise to the challenge and compete with the new players in the market. The increased competition on the market means that banks’ profitability and wallet share will inevitably suffer.”
- Jonathan Shawcross, managing director of banking, Gobeyond Partners: “2019 saw continued pressure on the traditional U.K. banks. Margins remained squeezed through rates staying lower for longer. Throughout this coming year, we expect to see the profitability squeeze continue in an increasingly difficult U.K. banking market – this will only make such major investments more and more challenging, yet more and more critical. These will be difficult decisions to make.”