What’s Behind a Red-Hot Quarter for Bank Earnings

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Alex Ossola (0:33)

Inflation cooled last month, offering some relief to Americans, but don't count on it to last. Plus, big banks raked in soaring profits last quarter.

SPEAKER_4 (0:43)

We're in a very healthy, active, exuberant mark of a very high crisis, a very high volume, so we benefit from that. We just don't know how long it will continue.

Alex Ossola (0:52)

A T-Rex named Gus just became the world's most expensive dinosaur.

It's Tuesday, July 14th. I'm Alex Ossola for The Wall Street Journal. This is the PM Edition of What's News, the top headlines and business stories that moved the world today.

New data out today show that consumer prices were up 3.5% last month from a year earlier, beating analyst expectations and giving Americans a bit of a break on inflation. Prices rose somewhat more in May. They were up 4.2% that month. The news came as Fed Chairman Kevin Warsh testified before Congress today, telling lawmakers that the central bank won't tolerate high inflation.

Kevin Warsh (1:32)

There might be some that look at this morning's data and say, mission accomplished, everything is swell. That is not my view.

Alex Ossola (1:40)

For more on what drove inflation lower and whether we can expect that to stick around, I'm joined now by WSJ economics reporter Matt Grossman. Matt, it seems like lower gas prices because of the de-escalation with the war in Iran are really the thing that led to these lower inflation numbers. Where else did consumers see that slower inflation play out?

Matt Grossman (1:58)

Prices across the board were pretty cool.

In categories like car insurance, hotels, cell phone plans, consumers actually saw price decreases last month as well. And so overall, even if you exclude food and energy prices, inflation was basically zero month over month in June.

Alex Ossola (2:17)

Should we expect this cooler inflation to stick around? Oil prices have already risen a lot this week with the Iran War heating up again. Are there other forces that policy makers are watching that could push up prices?

Matt Grossman (2:30)

The news probably won't be this good throughout the rest of the year. Like you said, oil is already rebounding. We can't expect that airfares, grocery prices, car insurance, used cars, hotels, that those are going to keep getting cheaper month after month.

Alex Ossola (2:46)

That was WSJ economics reporter, Matt Grossman. Thank you, Matt.

Matt Grossman (2:50)

Thank you.

Alex Ossola (2:54)

The Wall Street boom just keeps going, and it continues to lift profits for the country's biggest banks. You heard Jamie Dimon's note about the quote, healthy, active market from JPMorgan's earnings call earlier in our show. Well, JPMorgan, Goldman Sachs, Bank of America, Citigroup and Wells Fargo all reported second quarter results today.

As a group, their profits came to more than $49 billion. That's a 39 percent jump from a year ago and. Meet Analyst Estimates.

Gina Heeb (3:21)

We had this really historic IPO being SpaceX, and that was great for these big banks. Specifically Goldman, you saw revenue from its equity underwriting business more than double, and that was the bank that led this IPO. We saw a lot of volatility in the market because of the Iran conflict, which is good for traders, and then also M&A activity. We saw some records there as far as volumes go.

The first half of the year, we saw the highest levels, both in the US and globally, for M&A activity.

Alex Ossola (3:55)

That's banking reporter Gina Heeb. She says that the bank's results also suggest that consumers are doing well.

Gina Heeb (4:01)

There were some concerns that higher gas prices would pressure consumers, but they've been pretty resilient. We saw consumers continue to spend on cards, and we also saw delinquencies actually improve from a year ago at these big banks. And JPMorgan actually dismissed this idea of the K-shaped economy that a lot of executives have been talking about the past year plus. And this is the idea that the bottom half of the income spectrum has been doing a lot worse, or certain pockets of it have been. JPM actually said across income segments, it saw continued spending, low loan delinquencies, so that was a very good sign.

Alex Ossola (4:41)

But the bank executives also talked about risks.

Gina Heeb (4:44)