Citigroup’s Fraser, JPMorgan’s Dimon Warn of Financial Dangers as They Head to Capitol Hill By Bloomberg

&copy Bloomberg. Jamie Dimon, chief government officer of JPMorgan Chase & Co., throughout a Bloomberg Tv interview in London, U.Okay., on Wednesday, Could 4, 2022. Dimon mentioned the Federal Reserve ought to have moved faster to lift charges as inflation hits the world economic system.

(Bloomberg) — The CEOs of the largest US client banks are set to warn lawmakers that People are struggling amid surging inflation, as they brace for robust questions on how they’re serving to prospects being pummeled by rising costs.

The chief government officers will testify earlier than two congressional committees this week at a time when People face the very best ranges of inflation in a technology and economists debate whether or not the US has entered a recession. The hearings begin Wednesday as Federal Reserve officers meet to find out their subsequent interest-rate transfer and launch new financial projections.

Citigroup’s Jane Fraser mentioned in her written testimony for the Home Committee on Monetary Providers that “the worst of Covid could also be behind us, however the financial challenges we face are not any much less daunting.” JPMorgan’s Jamie Dimon wrote that the “US economic system right this moment is a traditional story of two cities,” with competing headwinds and tailwinds that make it “difficult to foretell the long run.”

“We proceed to see sturdy client spending from strong client steadiness sheets” and there are “plentiful job openings, with encouraging jobs experiences that proceed to shock financial forecasters,” Dimon wrote in his ready testimony. “On the similar time, many People are being crushed by excessive inflation eroding actual incomes, significantly from greater costs on fuel and meals,” together with persistent supply-chain issues and rising rates of interest. “Many People are feeling the ache, and client confidence continues to drop.”

The CEOs mentioned they’re offering assist to customers. Citigroup (NYSE:) mentioned it eradicated overdraft and different non-sufficient funds charges earlier this 12 months after it collected $103 million in such prices in 2021. Overdraft charges — the $30-something cost banks assess when a client spends greater than they’ve of their checking account — have come below hearth from lawmakers and regulators, who say the costs harm those that can least afford them.

Nonetheless, in an appendix to Fraser’s testimony, the New York-based financial institution acknowledged that it collected roughly $2.7 billion final 12 months in late charges, annual charges, month-to-month service prices and wire switch charges. That amounted to about 8% of the agency’s complete income from its North American operations.

“This income and the share of income they account for have been comparatively constant over the past 10 years,” the financial institution mentioned within the testimony.

At JPMorgan (NYSE:), the nation’s largest financial institution, coverage modifications on overdraft charges are serving to customers who’re in need of money, Dimon mentioned.

Overdraft-protection companies “assist prospects make vital funds, like masking a lease test, or automated withdrawals by third events, like utilities, which can assist prospects keep away from a late payment or unfavourable affect on their credit score report,” he wrote. “This service could be extra reasonably priced than many non-bank companies like payday loans or check-cashing companies.”

Virtually 70% of transactions lined by the insurance policies incur no overdraft payment in any respect, Dimon mentioned, including that income from such charges on the New York-based firm has plummeted 40% since earlier than the pandemic. 

Since March 2020, JPMorgan delayed funds due and refunded charges for greater than 3.5 million buyer accounts, giving again greater than $250 million and providing deferred funds and forbearance on greater than 2 million mortgage, auto and credit-card accounts, Dimon mentioned.

Financial institution of America (NYSE:), the second-largest US financial institution, additionally made modifications over the previous decade to its overdraft companies, “lowering shoppers’ reliance on overdraft and offering assets to assist shoppers handle their deposit accounts and funds responsibly,” CEO Brian Moynihan mentioned in his ready remarks. The Charlotte, North Carolina-based financial institution expects that, by subsequent 12 months, the brand new applications will cut back client overdraft charges by 97% from 2009 ranges, he wrote.

Cost Deferrals

The lender additionally assisted shoppers by means of the pandemic, serving to round 2 million particular person customers and small companies defer funds on bank cards and automobile and residential loans, Moynihan wrote.

“Even with a deferral, the overwhelming majority of these shoppers remained present on their funds. A small share have wanted prolonged help, and we proceed to work with them individually to assist them get again on monitor,” he mentioned. For shoppers with mortgages originated by BofA, the lender added deferred funds to the tip of the mortgage time period so that they aren’t making a lump-sum cost up entrance, Moynihan wrote.

Charlie Scharf, CEO of San Francisco-based Wells Fargo (NYSE:), touted his financial institution’s latest efforts to restrict overdraft-related charges, equivalent to eliminating non-sufficient-fund charges and the introduction of an early payday program for some prospects. He additionally pointed to initiatives to assist unbanked households, which have a disproportionate variety of Black, Hispanic and Native American prospects.

Wells Fargo has come below hearth from lawmakers this 12 months after a Bloomberg Information investigation discovered the lender permitted fewer than half of mortgage refinancings sought by Black householders through the pandemic, a decrease charge than for White candidates.

“We should be customer-centric in how we method our services and products,” Scharf mentioned in his ready remarks.

Along with Dimon, Fraser, Moynihan and Scharf, CEOs from U.S. Bancorp, Truist Monetary (NYSE:) Corp. and PNC Monetary Providers Group Inc (NYSE:). are set to look earlier than the Home committee on Wednesday and a Senate committee Thursday. The hearings are targeted particularly on points going through customers as a possible downturn looms. 

Questions despatched to the banks forward of the listening to embody queries on variety amongst prime executives and board members, mortgage-lending actions through the pandemic and what steps if any lenders have taken to assist customers “searching for financing to assist them entry secure abortion care.”

Regional Banks

The biggest of the regional banks by property, Minneapolis-based U.S. Bancorp used its ready remarks to make a case for its acquisition of MUFG Union Financial institution NA, which remains to be awaiting ultimate regulatory approval.

“We acknowledge that banks are the financial engines of our communities,” CEO Andy Cecere wrote in his testimony. “As such, we are able to make significant and important impacts in supporting the power of LMI communities and communities of colour to entry capital and construct wealth,” he mentioned, referring to low- and moderate-income communities. 

Testimony from Pittsburgh-based PNC emphasised steps the financial institution has taken to battle fraud on Zelle, the person-to-person funds platform owned collectively by the biggest banks. US senators earlier this 12 months urged lenders to do extra to curb scammer abuse of the platform.

Charlotte-based Truist touted its contributions to minority communities and low- and moderate-income debtors. These embody $31 billion in home-purchase loans and opening 16 new banking branches in low-and moderate-income or minority neighborhoods by the tip of this 12 months.

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