JPMorgan and Wells Fargo: Credit Card Spending Slows, Delinquencies Rise, But Economy Remains Strong

Last Friday, $JPMorgan (JPM.US)$ and $Wells Fargo & Co (WFC.US)$ reported slower credit card spending growth and rising delinquencies. For instance, JPMorgan's credit card sales rose by nearly 7% year-over-year, down from previous quarters. While this might suggest slowing economic activity, JPMorgan CFO Jeremy Barnum sees it more as a normalization of post-pandemic spending patterns rather than a sign of recession. Despite reduced travel and entertainment spending, retail consumption remains strong, showing resilient consumer confidence.

Barnum explained that the decline in travel and dining reflects a return to normal, not a shift to conservative spending. Retail spending remains solid, aligning with the bank’s “no landing” economic outlook.

At the same time, the rise in credit card delinquencies partly stems from loans issued under special pandemic conditions. Stimulus measures allowed borrowers to access credit they might not have qualified for otherwise. Despite the increase in delinquencies, banks see the issue as manageable.

Wells Fargo CEO Charlie Scharf noted that easing inflation and lower interest rates should relieve pressure on lower-income groups. He emphasized that this will benefit all consumers, especially those in lower income brackets.

Additionally, analysts suggest that the rise in credit card charge-off rates might reflect eased credit conditions, which could support economic growth. JPMorgan expects its credit card charge-off rate to be 3.4% this year, below its long-term target, indicating the bank's ability to expand credit.

Overall, these indicators suggest a positive outlook for the credit card business, especially given steady consumer spending and moderate credit expansion.