The cost of the US banking industry continues to rise, but a large part of it is caused by themselves.
The three major banks updated their cost targets for 2024 on Friday, nearly $4 billion higher than the beginning of the year. The main reasons include regulatory fines, costs of correction, and higher fees paid for bank failures last year.
JPMorgan's reasons are quite sunny. The company earned a lot of money by investing in Visa and donated $1 billion to charity.
With the Fed's pause on interest rate hikes, the banking industry's largest source of revenue, net interest income, has stopped growing. The six largest banks realized a total profit of $122 billion last year, but it was lower than the peak in 2021, when their investment banking and trading businesses set records.
Wells Fargo increased its annual spending forecast by $1.4 billion to $54 billion. The reason is that income-related compensation expenses have increased, the cost of correcting errors for customers is higher than expected, and the Federal Deposit Insurance Corporation's special assessment fee of $0.336 billion. JPMorgan's special assessment fee is $0.725 billion.
Citigroup did not include the two fines issued by the Federal Reserve and the Office of the Comptroller of the Currency, as well as the $285 million FDIC fee, in its expense target. However, the bank said that measures taken to meet regulatory requirements could result in actual expenses reaching the upper end of the targeted range for the year.