Citigroup’s Fraser and JPMorgan’s Dimon Warn of Economic Risks If They Head to Capitol Hill

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(Bloomberg) — The CEOs of America’s largest consumer banks will warn lawmakers that Americans are grappling with rising inflation, as they brace for tough questions about how they help customers ravaged by rising prices.

The chief executive officers will testify before two congressional committees this week at a time when Americans are experiencing the highest inflation in a generation and economists are debating whether the US has entered a recession. The hearings begin Wednesday when Federal Reserve officials meet to determine their next interest rate step and release new economic projections.

Jane Fraser of Citigroup said in her written testimony to the House Committee on Financial Services that “the worst of Covid may be behind us, but the economic challenges we face are no less daunting.” Jamie Dimon of JPMorgan wrote that “today’s US economy is a classic tale of two cities,” with headwinds and tailwinds making it “challenging to predict the future.”

“We continue to see strong consumer spending due to solid consumer balance sheets” and there are “plenty of job openings, with encouraging jobs reports that continue to surprise economic forecasters,” Dimon wrote in his prepared testimony. “At the same time, many Americans are being crushed by high inflation that is hurting real incomes, especially higher gas and food prices,” along with ongoing supply chain problems and rising interest rates. “Many Americans are feeling the pain and consumer confidence continues to fall.”

The CEOs said they are helping consumers. Citigroup (NYSE:) said it eliminated charges for overdrafts and other underfunded funds earlier this year after collecting $103 million in such charges in 2021. Overdrafts — the $30 fee banks assess when a consumer spends more than they have in their bank account — have come under fire from lawmakers and regulators, who say the charges hurt those who can pay them least.

Still, the New York-based bank acknowledged in an attachment to Fraser’s testimony that it collected about $2.7 billion last year in late payment fees, annual fees, monthly service charges and wire transfer fees. That amounted to about 8% of the company’s total revenue from its North American operations.

“These revenues and the percentage of revenue they represent have been relatively consistent over the past 10 years,” the bank said in the testimony.

At JPMorgan (NYSE:), the nation’s largest bank, policy changes related to overdrafts are helping consumers who are short of cash, Dimon said.

Overdraft protection services “help customers make critical payments, such as covering a rental check, or automatic withdrawals by third parties, such as utilities, which can help customers avoid late compensation or negatively impact their credit report.” to avoid,” he wrote. “This service can be cheaper than many non-banking services like payday loans or check cashing.”

Nearly 70% of transactions covered by the policies involve no overdraft fees at all, Dimon said, adding that revenues from such fees at the New York-based company have fallen 40% since pre-pandemic.

Since March 2020, JPMorgan has deferred payments due and reimbursed fees for more than 3.5 million customer accounts, returning more than $250 million and providing deferred payments and forbearance on more than 2 million mortgage, car and credit card accounts, it said. dimon.

Bank of America (NYSE:), the second-largest U.S. bank, has also made changes to its overdraft services over the past decade, “reducing customers’ reliance on overdrafts and providing helping customers responsibly manage their deposit accounts and finances,” CEO Brian Moynihan said in his prepared remarks. The Charlotte, North Carolina-based bank expects its new programs to cut consumer overdraft costs by 97% from 2009 levels next year, it wrote.

Deferral

The lender also helped customers through the pandemic, helping about 2 million individual consumers and small businesses delay payments on credit cards and auto and home loans, Moynihan wrote.

“Even with a delay, the vast majority of those customers stayed on top of their payments. A small percentage have required extensive assistance and we continue to work with them individually to get them back on track,” he said. For customers with BofA mortgages, the lender added deferred payments at the end of the loan term so they don’t make a lump sum upfront payment, Moynihan wrote.

Charlie Scharf, CEO of San Francisco-based Wells Fargo (NYSE:), praised his bank’s recent efforts to mitigate overdraft costs, such as eliminating underfunded fund fees and introducing an early payday program for some clients. He also pointed to initiatives to help unbanked households, which have a disproportionate number of black, Hispanic and Native American customers.

Wells Fargo has come under fire from lawmakers this year after a Bloomberg News survey found that the lender approved less than half of the mortgage refinancing sought by black homeowners during the pandemic, a lower rate than for white applicants.

“We need to be customer-centric in the way we approach our products and services,” Scharf said in his prepared remarks.

In addition to Dimon, Fraser, Moynihan and Scharf, CEOs of US Bancorp, Truist Financial (NYSE:) Corp. and PNC Financial Services Group Inc (NYSE:). will appear before the House Committee on Wednesday and before a Senate Committee on Thursday. The hearings focus specifically on issues consumers face when a potential downturn looms.

Questions sent to banks ahead of the hearing include questions about diversity among top executives and board members, mortgage lending during the pandemic, and what steps any lenders have taken to help consumers “seeking financing to access safe abortion care.” .

regional banks

Minneapolis-based US Bancorp, the largest of the regional banks by assets, used its prepared comments to make a case for the acquisition of MUFG Union Bank NA, which is still awaiting final regulatory approval.

“We recognize that banks are the economic engines of our communities,” CEO Andy Cecere wrote in his testimony. “As such, we can make a meaningful and significant impact by supporting the ability of LMI and communities of color to access capital and build wealth,” he said, referring to low- and middle-income communities.

Testimony from Pittsburgh-based PNC highlighted the steps the bank has taken to fight fraud on Zelle, the personal payment platform jointly owned by the largest banks. US senators earlier this year asked lenders to do more to curb abuse of the platform by scammers.

Truist from Charlotte praised his contributions to minority communities and low- and middle-income borrowers. Those include $31 billion in loans to buy a home and the opening of 16 new bank branches in low- and middle-income or minority neighborhoods by the end of this year.

©2022 Bloomberg LP



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