Higher Rates Turbocharge Lending Income for Biggest US Banks

(Bloomberg) -- Three of the biggest US banks set a fresh record in the third quarter for how much they earned from lending, with customers continuing to borrow even as interest rates increased.

JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. on Tuesday reported a combined $56.5 billion of net interest income in the period, setting a new high-water mark for a fifth straight quarter. JPMorgan predicted that NII will be even higher in 2027.

That outlook represents a significant shift from earlier this year, when banks expected interest rates to drop and blockbuster trading hauls grabbed most of investors' attention. That overshadowed the more traditional business of earning money from loans and other interest-bearing assets.

Banks also see consumers and businesses maintaining their ability keep up with loan payments. All three companies reported fewer so-called non-accrual loans, those from which the firms stop recognizing interest income. Bank of America Corp. is set to reported third-quarter results on Wednesday.

Still, the lenders are remaining cautious amid an array of geopolitical uncertainties, including wars in Ukraine and the Middle East, stubborn inflation and elevated oil prices.

JPMorgan is "just making sure we're really scrubbing everything," Chief Financial Officer Jeremy Barnum said Tuesday. "There's capital being tapped through all kinds of different mechanisms, we just need to be really, really on top of things to make sure that nothing slips through."