Citigroup’s Fraser and JPMorgan’s Dimon warn of economic risks as they head to Capitol Hill

(Bloomberg) – The CEOs of America’s biggest consumer banks are set to warn lawmakers that Americans are grappling with runaway inflation, as they prepare for tough questions about how they help customers to be hit by the price hike.

The CEOs will testify before two congressional committees this week at a time when Americans face the highest levels of inflation in a generation and economists debate whether the United States has entered a recession. Hearings begin Wednesday as Federal Reserve officials meet to determine their next interest rate move and release new economic projections.

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

“We continue to see strong consumer spending from strong consumer balance sheets” and there are “plenty of job openings, with encouraging employment reports continuing to surprise economic forecasters,” Dimon wrote in his prepared testimony. “At the same time, many Americans are being crushed by high inflation that is eroding real incomes, particularly from rising gas and food prices,” as well as ongoing supply chain issues. and rising interest rates. “Many Americans are feeling the pain and consumer confidence continues to decline.”

CEOs said they help consumers. Citigroup (NYSE:) said it eliminated overdraft fees and other insufficient funds fees earlier this year after collecting $103 million in such fees in 2021. current account – have been criticized by lawmakers and regulators, who say that fees hurt those who can least afford them.

Yet, in an appendix to Fraser’s testimony, the New York-based bank admitted to collecting about $2.7 billion last year in late fees, annual fees, monthly service fees and wire transfer fees. This represented approximately 8% of the company’s total revenue from its North American operations.

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

At JPMorgan (NYSE:), the nation’s largest bank, policy changes on overdraft fees are helping cash-strapped consumers, Dimon said.

Overdraft protection services “help customers make critical payments, like covering a rent check, or automatic withdrawals by third parties, like utilities, which can help customers avoid late fees or a negative impact on their credit report,” he wrote. “This service can be more affordable than many non-bank services like payday loans or check cashing services.”

Nearly 70% of transactions covered by the policies incur no overdraft fees, Dimon said, adding that revenue from such fees at the New York-based company has fallen 40% since before the pandemic.

Since March 2020, JPMorgan has delayed payments due and refunded fees for more than 3.5 million customer accounts, returning more than $250 million and offering deferred payments and forbearance on more than 2 million mortgage, auto, and auto accounts. and credit cards, Dimon said.

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

Payment deferrals

The lender has also been helping customers through the pandemic, helping about 2 million individual consumers and small businesses defer payments on credit cards and car and home loans, Moynihan wrote.

“Even with a deferral, the vast majority of these customers remained current with their payments. A small percentage required extended assistance, and we continue to work with them individually to help them get back on track,” he said. For customers with BofA-issued mortgages, the lender has added deferred payments at the end of the loan term so they don’t make a lump sum payment up front, Moynihan wrote.

Charlie Scharf, CEO of the San Francisco-based company Wells Fargo (NYSE:), touted his bank’s recent efforts to limit overdraft fees, such as eliminating insufficient funds fees and introducing an advance payday program for certain customers. He also pointed to initiatives to help unbanked households, which have a disproportionate number of black, Hispanic and Native American customers.

Wells Fargo came under fire from lawmakers this year after a Bloomberg News investigation found the lender approved less than half of mortgage refinances sought by black homeowners during the pandemic, a lower rate than white applicants.

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

In addition to Dimon, Fraser, Moynihan and Scharf, CEO of US Bancorp, Truist Financial (NYSE:) Corp. and PNC Financial Services Group Inc (NYSE:). are scheduled to appear before the House committee on Wednesday and before a Senate committee on Thursday. The hearings focus specifically on issues facing consumers as a potential downturn looms.

Questions sent to banks ahead of the hearing include questions about diversity among senior executives and board members, mortgage operations during the pandemic, and steps lenders have taken to help consumers “ seek funding to help them access safe abortion care.”

Regional banks

The largest of the regional banks by assets, Minneapolis-based US Bancorp, used its prepared remarks to make the case for its 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 have significant and meaningful impacts by supporting the ability of LMI communities and communities of color to access capital and create wealth,” he said, referring to communities at low and moderate income.

Testimony from Pittsburgh-based PNC highlighted steps the bank has taken to combat fraud on Zelle, the person-to-person payments platform jointly owned by the largest banks. Earlier this year, US senators urged lenders to do more to combat abuse of the platform by scammers.

Charlotte-based Truist touted his contributions to minority communities and low- and moderate-income borrowers. These include $31 billion in loans for home purchases and the opening of 16 new bank branches in low- and moderate-income or minority neighborhoods by the end of this year.

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