Higher Rates Are Starting to Weigh on Banks

Higher Rates Are Starting to Weigh on Banks By Hardika Singh

JPMorgan, Wells Fargo and Citigroup post better-than-expected first-quarter results, but their forecasts are muted. Meanwhile, homebuyers are losing hope for lower interest rates, and China wants to tighten supervision of new listings. Read on for this news and more.

Top News High Rates Have Been a Profit Machine For Banks. Not Anymore.

Some of the nation's biggest banks said Friday the economy continues to look strong, but that they are starting to feel the pinch of higher-for-longer interest rates.

JPMorgan Chase, Wells Fargo and Citigroup all reported better-than-expected first-quarter profits and revenues, and executives said consumers and businesses are healthy. But they warned that their core lending incomes would be muted this year as higher interest rates force them to pay up for deposits, a pressure that no longer seems likely to ease soon.

Schmid Calls For Patience Before Making Any Change in Rates

Hot inflation, strong growth and elevated asset market prices all suggest that the current stance of the U.S. central bank's interest-rate policy is appropriate , Kansas City Fed President Jeffrey Schmid said on Friday. (MarketWatch)

U.S. Economy Stay Put or Pay Up: Home Buyers Lose Hope for Lower Rates

Prospective home buyers are giving up hope that interest rates will come down soon. They are changing their life plans accordingly. An engaged couple that had sold stocks to fund a down payment now expects to rent for another five years. A family that was looking to trade up is considering building an extra room instead. An investor plowing ahead on a purchase is scaling back his profit projections.

Atlanta Fed's Bostic: 'Housing Is Unaffordable for Far Too Many' 'Envy of the World'-U.S. Economy Expected to Keep Powering Higher

It has been two years since forecasters felt this good about the economic outlook. In the latest quarterly survey by The Wall Street Journal, economists lowered the chances of a recession within the next year to 29% from 39% in the January survey. That was the lowest probability since April 2022, when the chances of a recession were set at 28%.

Financial Regulation China Seeks to Boost Stock Market Supervision

China has issued new national-level guidelines aimed at addressing stock-market volatility, including tightening supervision of new listings. The evaluation criteria for companies seeking to list in China will be enhanced, including requiring companies to disclose their dividend policy, the State Council said in a statement.

Forward Guidance Monday (all times ET)

2:30 a.m.: Dallas Fed's Logan in panel discussion at IMF-BOJ Conference: Gender Diversity in the Workplace as a Key to Economic Growth

5 a.m.: EU industrial production for February

8:30 a.m.: U.S. retail sales for March

2 p.m.: ECB's Lane speaks to University College Dublin Economics Society

8 p.m.: San Francisco Fed's Daly gives keynote remarks to Stanford Institute for Economic Policy Research

Tuesday

2 a.m.: U.K. unemployment for March

8:15 a.m.: Canada housing starts for March

8:30 a.m.: U.S. housing starts for March

8:30 a.m.: Canada consumer-price index for March

9 a.m.: Fed's Jefferson speaks at International Research Forum on Monetary Policy, Washington, D.C.

9:15 a.m.: U.S. industrial production and capacity utilization for March

12:30 p.m.: New York Fed's Williams in moderated discussion at Economic Club of New York

13:15 p.m.: Fed's Powell and Bank of Canada's Macklem in moderated discussion at Washington Forum on the Canadian Economy

Research Number of People Who Think They'll Never Own A Home Rises

Nearly 40% of U.S. renters don't believe they'll ever own a home, up from 27% less than a year ago, according to Redfin. Lack of affordability is the prevailing reason renters believe they're unlikely to become homeowners. Nearly half of renters who don't believe they'll buy a home in the near future said it's because available homes are too expensive. The next most common obstacles are the ability to save for a down payment, ability to afford mortgage payments, and high mortgage rates. Roughly one in eight, or 14%, simply aren't interested in owning a home, Redfin says. Buying a home has become increasingly out of reach for many Americans due to the one-two punch of high home prices and high mortgage rates. - Chris Wack

Basis Points China's financial institutions issued a smaller amount of credit in the first three months of the year when compared with a year earlier, suggesting continued tepid borrowing demand from corporates and households. China's central bank kept key policy rates steady and drained liquidity from the banking sector as economic data shows fresh signs of weakness. The Bank of England will place more stress on developments that could upend its expectations for the U.K. economy and future interest rates as part of an overhaul of forecasting and communications recommended by Ben Bernanke, a former chair of the Federal Reserve. - Paul Hannon An early reading of U.S. consumer sentiment in April retreated from a 32-month high , a sign of some frustration on the part of Americans about lingering inflation. The first of two readings of the consumer-sentiment survey dipped to 77.9 this month from 79.4 in March, the University of Michigan said Friday. - MarketWatch About Us

WSJ Pro Central Banking brings you central banking news, analysis and insights from WSJ's global team of reporters and editors. This newsletter was compiled by markets reporter Hardika Singh in New York. Send your tips, suggestions and feedback to [hardika.singh@wsj.com].

This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

April 15, 2024 07:15 ET (11:15 GMT)

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