‘No evidence of distress’ in Q1 card data, issuers say, despite ‘fifty-fifty’ recession odds

The news: JPMorgan and Wells Fargo kicked off the Q1 earnings season with some better-than-expected results but also took steps to prepare for a deeper economic slowdown.

• JPMorgan beat revenue expectations with $46.01 billion, per CNBC.
• Wells Fargo revenues fell 3% to $20.15 billion, but per-share profit of $1.33 beat expectations.

Both banks attributed higher credit card revenues to consumers paying more interest on larger balances.

Consumer financial health: As all eyes turn to how consumers will respond to potential tariff-driven price hikes, JPMorgan CFO Jeremy Barnum said there was “no evidence of distress” among its customers.

• JPMorgan and Wells Fargo noted that consumers are entering Q2 with some wind still in their sales: JPMorgan’s credit and debit volume rose 7% YoY, and Wells Fargo’s rose 4.9%.
• Delinquencies also showed some promise. The share of consumers 30+ days past due on their credit card payments fell year over year for both JPMorgan and Wells Fargo, to 2.21% and 2.82%, respectively. JPMorgan’s rate rose on the quarter.

Battening down the hatches: Banks may not have had cause for alarm in Q1, but after President Donald Trump’s “Liberation Day” tariffs sent a spasm through markets, their outlooks have grown more leery.

• JPMorgan raised the unemployment forecast used in its allowances for credit losses from 5.5% to 5.8%, building the cash pool by $549 million. CEO Jamie Dimon said the bank’s forecasters see a “fifty-fifty” odds of a recession. (JPMorgan’s official position is a 60% chance.)
• Wells Fargo was considering easing lending standards but now “will certainly be slower … to do that,” per CEO Charlie Sharf. Wells Fargo also slashed its advertising spend by 26% QoQ and 8% YoY—ad budgets are often one of the first line items on the chopping block when firms anticipate a downturn.

Consumers feel even worse. University of Michigan’s consumer sentiment index cratered 34% YoY and 10.9% MoM on Friday, and 67% of consumers expect unemployment will rise—the largest share since 2009. The news will hardly inspire optimism among banks.

Our take: Trade uncertainty risks derailing the painfully slow turnaround in key credit card metrics like delinquencies and charge-offs that banks need to feel more confident lending to consumers and businesses.

At the same time, there are signs consumers are throttling their own credit card spending to protect themselves in the event of a recession.

Banks risk getting hit from both sides if the economy sours: weaker interest income as indebted cardholders fall into delinquency and weaker interchange income as less indebted cardholders flee to the perceived safety of debit transactions.