When companies open their books, earnings season begins in the stock market. Traditionally, in the US, banks are the first to do so. But despite the good results, the risks are also evident.
When the stock market rises and falls, banks line their pockets. The three largest banks in the United States, JP Morgan Chase, Bank of America and Citigroup, have seen strong growth in trading operations in recent months.
US President Donald Trump's tariff policy is not only generating anxiety but also significant revenue for banks. Market fluctuations lead to strong trading volumes, which benefit banks.
Economic weakness and concerns about credit cards
The overall situation for US banks is stable. Major players posted profits in the millions of dollars in the last quarter. There are no signs of a crisis. However, the outlook for the US economy has darkened. Economic weakness could also affect the banks' businesses.
"For US banks, the credit card business is important," explains Jarrid Klug of asset manager DWS. Credit cards are unsecured loans, so they carry risk. If a customer loses their job, a loss is common. If, in addition, the economy slows and unemployment rises, that would be a negative factor.
Concerns about inflation and interest rates
Now, attention is mainly focused on the question: how will the US government's tariff policy affect the US economy? Economists expect prices to rise significantly as a result of the tariffs. In June, there were only hints of this. However, according to data from the US Department of Labor, inflation has increased recently, reaching 2.7% compared to the same month last year.
This reduces the Federal Reserve's room to maneuver to lower interest rates. High interest rates and increased uncertainty can affect consumer behavior, and banks notice this when their customers invest less.
That's the view of market analyst Jochen Stanzl of CMC Markets. In his view, Americans may be more reluctant to engage in big spending and experimentation. He sees this as a weakness on the part of American banks.
Investor reactions
Concerns about the US economy have already become visible in financial markets. The dollar is weakening and the euro is strengthening. Investors are restructuring their funds and placing them, for example, in Europe, which has also benefited the German stock market.
Also playing a role are hopes that the multi-billion dollar investments announced by the German government will have a positive impact on the economy. European banks could benefit from this in the long run.
A ray of hope for European banks
In Stanzl's opinion, this represents an opportunity for banks to "take advantage of this optimistic state that is currently felt in the stock market, in anticipation of what is to come." This would lead, among other things, to an improvement in the lending business.
However, a look at bank balance sheets reveals that even the largest European financial institutions still cannot compete with the American market leaders. Despite the great uncertainty surrounding the American economy, the strength of American banks is unlikely to change in the short term./ DW (A2 Televizion)
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