Monday, July 21st, 2025
JPMorgan, Citigroup, Wells Fargo, and Bank of America, four giants that collectively represent around 40% of the entire US banking sector, have reported their latest earnings. The message is clear from these results: the US economy is doing well.
Bank earnings aren’t just about the financial sector; they’re a window into the broader economy. Think of these banks as the arteries of the financial system: they pump money through the economy in the form of loans, credit, mortgages, and business finance. When things go wrong, they’re usually the first to know.
That’s why investors should pay close attention to the signals buried in these earnings reports. They tell us how consumers are behaving, whether companies are investing, and how much financial risk is building up.
One of the easiest ways to check on consumer health is to look at credit card charge-off rates, in other words, how often banks are forced to write off credit card debt because customers can’t pay it back.
Across JPMorgan, Citi, and Bank of America, these charge-off rates are not rising. In fact, they’re staying roughly flat. If American consumers were struggling, we’d see this in the form of rising charge-offs. But that’s not happening. People are still paying their bills, which implies that households are relatively healthy, even in the face of higher interest rates and political uncertainty.
Another closely watched number is provisions for bad loans. This is the money banks set aside in case loans go bad in the future. At JPMorgan, Wells Fargo, and BofA, these provisions are trending flat, again, no big increase in expected defaults.
At Citi, there’s a mild upward trend, but even here, analysts were pleasantly surprised at how tame the figures were.
During times of economic stress (like 2008 or early 2020), provisions for bad loans shoot up. The fact that they’re holding steady now suggests that banks are not seeing signs of an imminent downturn in their loan books and that’s a vote of confidence in the economy.
Despite concerns over trade tariffs, regulatory changes, and political volatility, particularly from sudden policy moves or rhetoric out of Washington, the reality is that the US macroeconomy hasn’t yet been derailed.
Markets are strong because the fundamentals are strong.
As an investor trying to judge whether now is a good time to be in US stocks or financials, this is a reminder that macro strength can persist even during uncertainty.
We would like to thank Dominion Capital Strategies for writing this content and sharing it with us.
Sources: Bloomberg, Yahoo Finance, Marketwatch, MSCI.
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