Chart of the Day: US recession through banking lens

Markets expect a recession in the US soon and some even believe one is already underway. But signs of a recession are yet to show up on the balance sheet of banks there. A look at the quarterly earnings of top US banks shows that loan growth momentum is still strong for them. In fact, most of the big banks reported double digit loan growth for the second quarter of 2022. As the chart shows, Goldman Sachs, Bank of America and Wells Fargo reported a remarkable turnaround in credit growth. To be sure, these growth figures also reflect a base effect. Baring Citi, the quarterly momentum in loan growth has improved for most banks. Consumer loans are still growing healthy and card spends continue to be robust. The commentary from bank managements has been cautious but not overly pessimistic yet. Performance of banks in the coming quarter would be important to monitor as a recession is expected to be imminent. But more than falling loan growth, any pain in leveraged US households could show up as rise in delinquencies for banks first.