What Big Bank Earnings Reveal About the Real U.S. Economy
Consumer resilience, corporate caution, and hidden structural risks—straight from the boardrooms of JPM, Citi, WFC, and BNY Mellon
Consumer strength, corporate hesitation, and where the real risks lie
As Wall Street wraps up another earnings season, the latest reports from the largest U.S. banks offer more than just profit numbers. They act as a window into the real economy—on the ground, beyond economic theory and market models.
JPMorgan, Citigroup, Wells Fargo, and BNY Mellon all posted solid Q2 results. But beneath the financial strength lies a shared message: the U.S. economy isn’t in crisis—but it’s not in the clear either. Consumers are holding up. Businesses are cautious. And structural risks, especially in commercial real estate and global trade, are starting to creep back into focus.
Let’s unpack what these banks are telling us—not just about their balance sheets, but about the health of the U.S. economy itself.
1. A Resilient Economy—For Now
Across the board, bank CEOs agree: the U.S. economy continues to outperform recession forecasts. Unemployment remains low. Credit quality is still strong. And despite high interest rates, spending hasn’t fallen off a cliff.
Wells Fargo CEO Charlie Scharf pointed out that credit losses declined across both consumer and commercial portfolios in Q2, and noted that the bank is now finally operating without its post-scandal asset cap—a sign of normalized operations after years of regulatory restrictions. JPMorgan echoed that optimism, with strong performance across consumer lending, trading, and investment banking.
Citi CEO Jane Fraser was more measured, acknowledging that inflationary pressures from tariffs and global supply reconfigurations could start feeding through in the second half of the year. But she also emphasized the strength of the U.S. private sector and capital markets:
“The strength of the American entrepreneur and a healthy consumer has exceeded expectations.”
Still, these remarks come with an asterisk: much of the current resilience has been driven by robust liquidity, pandemic-era savings buffers, and still-solid wage growth. What happens when those tailwinds fade?
2. Consumers: Holding Up, But No Longer on a Sugar High
If there’s one consistent theme across bank earnings, it’s this: U.S. consumers are still spending, but the easy phase of the recovery is behind us.
JPMorgan reported 9% year-over-year growth in credit card balances, with a charge-off rate of 3.4%—well below its full-year guidance.
Wells Fargo noted continued growth in checking accounts and digital users, while auto loans saw their first YoY increase in three years.
Citigroup highlighted strong performance in branded cards and said its card portfolio remained “high-quality,” with 85% of borrowers having FICO scores above 660.
In short: consumers are not in distress. But they’re no longer as flush with cash as they were in 2021–2022. Wells Fargo observed that spending growth, while still positive, has slowed. Card delinquency rates are rising modestly, and demand for unsecured personal loans remains subdued.
What’s emerging is a more disciplined consumer—still solvent, but far more selective.
3. Corporate America: Not Retreating, But Not Expanding Either
While consumer behavior remains broadly supportive of economic growth, corporate behavior suggests something else entirely.
Across all major banks, the tone from commercial clients is cautious:
Wells Fargo reported that most businesses are holding off on hiring and inventory restocking.
JPMorgan saw stronger investment banking demand—but mostly from large firms with balance sheet flexibility.
Citi noted that capital expenditures and hiring activity have “paused” in many sectors.
This doesn’t mean companies are in trouble. Far from it. Corporate balance sheets are generally strong, and access to capital is available for those who need it. But in the face of geopolitical uncertainty, elevated interest rates, and erratic trade policy, executives are favoring liquidity over expansion.
Tech and healthcare remain relative bright spots. In contrast, cyclical sectors—manufacturing, real estate, transport—are clearly in wait-and-see mode.
4. CRE Risk: A Slow-Moving Storm
Among all asset classes, commercial real estate (CRE)—especially office buildings—continues to stand out as the largest structural risk.
Wells Fargo is the most exposed of the big banks, with $25.2 billion in office-related loans, representing 2.7% of its total loan book. Management acknowledged continued pressure on office valuations and vacancy rates, but said reserve coverage (11.1% for office loans) was more than adequate.
JPMorgan and Citi, by contrast, downplayed their exposure, noting that losses were limited to a handful of credits and no systemic risk was visible—for now.
Still, with remote work increasingly permanent and refinancing risks rising due to higher rates, the market isn’t out of the woods. The biggest danger may not come from sudden collapses—but from slow, drawn-out repricing across urban office portfolios. If lending standards tighten in response, it could ripple through regional banks and small business lending.
5. Real Macro Risks Lurking in the Second Half
While Q2 data shows resilience, multiple risks are building under the surface—risks that may not be fully priced into market sentiment.
a) Tariff Shock 2.0
With a new round of tariffs on Canadian, Chinese, and Latin American goods now taking effect, multiple banks flagged inflationary pressures re-entering the system. Citi’s Jane Fraser specifically warned of a summer uptick in goods prices, which could disrupt consumer and business confidence just as growth moderates.
b) Policy Volatility
JPMorgan's management was notably cautious when asked about regulatory relief and capital rules. CFO Jeremy Barnum pointed out that while the stress capital buffer (SCB) is manageable, the increase in risk-weighted assets (RWA)—driven by wholesale lending and markets—has pushed CET1 ratios slightly lower. This reflects higher operational risk, not a systemic threat, but it shows that volatility is coming from both market and policy fronts.
c) Consumer Cushion Eroding
Banks remain confident about consumer health, but savings buffers are clearly depleting. Delinquencies in subprime segments are creeping up, and banks are beginning to tighten lending standards quietly. With student loan payments back in effect and housing affordability at a multi-decade low, the floor under the consumer is still firm—but thinner than it was a year ago.
d) Lagged Effects of Monetary Policy
Even though the Fed has paused rate hikes for now, the full effects of the 2022–2024 tightening cycle may not be fully realized until later this year. Multiple banks acknowledged that while demand is still healthy, credit formation is slowing. High financing costs are discouraging both consumer borrowing and business investment.
6. A Final Word: Stability ≠ Immunity
Taken together, the Q2 earnings from the big banks tell a consistent story. The economy is stable. Consumers are resilient. Corporates are conservative. Banks are well-capitalized.
But none of that guarantees immunity from shocks. If tariffs feed through into sustained inflation, if interest rates stay higher for longer, or if global tensions escalate, the balance could shift quickly.
There’s no imminent crisis—but there is vulnerability.
The smartest people in the room—the CEOs and CFOs of the largest banks—aren’t sounding alarms. But they’re quietly preparing. Raising reserves. Tightening standards. And watching closely.