In the aftermath of President Donald Trump’s “Liberation Day” tariffs, the stock market continues to experience volatility. However, consumer spending has not yet seen a significant decline. During recent quarterly earnings calls, credit card companies provided optimistic forecasts regarding consumer spending, though many have taken precautions to safeguard against potential economic downturns.
The trade policies enacted by President Trump have led to stock market instability, yet the effects of the “Liberation Day” tariffs have not yet appeared in the quarterly financial statements of the nation’s major lenders, where consumer spending trends are often first indicated.
Credit card companies reported robust earnings as consumer borrowing, spending, and new credit card account openings increased compared to the previous year. Mark Mason, Chief Financial Officer of Citigroup, remarked, “The consumer continues to be resilient and discerning in their spend,” during a quarterly earnings call, highlighting a revised consumer mindset. Mason noted a shift in spending towards essentials and away from travel and entertainment.
JPMorgan Chase reported a 7% year-over-year increase in credit and debit card spending, though it observed that consumers were holding higher credit card balances. Similarly, Bank of America noted a 4% growth in spending from the previous year, along with a decrease in late payments on loans from the previous quarter.
Despite this positive growth, major credit card companies are bracing for an economic downturn as loan delinquencies rise to their highest level in five years. Jeremy Barnum, Finance Chief at JPMorgan Chase, highlighted the current focus on the future, which he described as “unusually uncertain,” during an earnings call on April 11.
JPMorgan, assessing the risk of a recession at 60%, has bolstered its reserves for future losses by increasing its allowance for credit losses (ACL) by $973 million, bringing the net reserve total to $27.6 billion. This ACL serves as a financial buffer to offset credit card bill defaults. The bank also allocated $3.3 billion to its loan loss provisions, marking a 73% increase from the $1.9 billion set aside to address unpaid loans from the previous year. Additionally, JPMorgan maintains $1.5 trillion in cash and marketable securities.
Citi is similarly preparing for economic challenges by increasing its cost of credit by over 15% from the previous year to $2.7 billion. The bank also augmented its total reserves by $1 billion in the first quarter, bringing the total from $21.8 billion to $22.8 billion, in anticipation of potential economic downturns. Citi maintains a strong liquidity and capital position with cash levels reaching $960 billion.
Neither JPMorgan nor Citi immediately responded to Fortune’s requests for comment.
This article was originally published on Fortune.com.
