Americans Are Borrowing Again, Which Is Great News for Big Lenders

The pandemic saw consumers dial back on their borrowing, particularly on their credit cards. (Photo: AP)
The pandemic saw consumers dial back on their borrowing, particularly on their credit cards. (Photo: AP)


  • Fast growth in card lending helped offset pressures like rising deposit costs

Americans’ returning appetite for debt is making life a lot easier for the biggest banks right now.

The pandemic saw consumers dial back on their borrowing, particularly on their credit cards. For a while, that was a drag for lenders, who primarily make money from plastic when people borrow rather than when they spend. Now, just when it is needed, this borrowing is coming back: Fast-rising card borrowing is helping offset the challenges brought by higher interest rates, such as rising deposit costs and losses on bank bond portfolios.

The country’s biggest bank, JPMorgan Chase increase; green up pointing triangle, reported in its second-quarter results on Friday a 44% year-over-year rise in net interest income, which is the core measure of how much it earns from lending. Even excluding its takeover of First Republic in May, that figure grew 38%.

That was thanks partly to fast loan growth in cards, which typically carry high yields. Card loans at the end of the second quarter were up 16% versus a year ago, and up 6% from the first quarter. Despite a jump in the cost of deposits, JPMorgan’s reported measure of net interest margin—a metric of how much banks earn in interest versus what they pay out—only shrank slightly, from 2.63% in the first quarter to 2.62%. The bank raised its full-year guidance for core net interest income to $87 billion from $81 billion in its first-quarter report, of which $3 billion is from the First Republic deal.

Being giant lenders to consumers via cards is yet another reason why the biggest banks can thrive even as some regional banks have collapsed or struggled. JPMorgan absorbed First Republic, whose lending portfolio featured low-yielding home loans that became a millstone as rates rose. By contrast card lending has floating rates that automatically adjust higher when benchmark rates rise.

For its part, Wells Fargo decrease; red down pointing triangle also raised its guidance for full-year net interest income growth to 14% in 2023, from a prior estimate of 10% growth. This was despite seeing deposit levels decline, as well as its net interest margin narrow from 3.20% in the first quarter to 3.09% in the second quarter. Once again, an offset was fast consumer loan growth: Card loans at the end of the second quarter were up 4% from the first quarter, and 16% from a year prior.

It wasn’t all rosy for banks. Wall Street trading, deal making and corporate activity remained challenged as executives and investors grappled with uncertainty about the economy and the direction of interest rates. Citigroup decrease; red down pointing triangle reported a 15% year-over-year rise in card revenues, but revenue and net income at the global bank fell overall.

While the mood in corporate boardrooms may be cautious, Americans’ stepped up pace of card borrowing could be seen as a vote of confidence in their own economic prospects as the job market remains tight and wages are rising. The risk of course is that borrowers could get ahead of themselves, eventually generating credit losses for banks.

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The good news is that these losses so far aren’t exceeding expectations: JPMorgan for example maintained its forecast for full-year net charge off rate for cards at 2.6%. JPMorgan Chief Executive Jamie Dimon said in the bank’s release that “consumer balance sheets remain healthy, and consumers are spending, albeit a little more slowly."

So for now at least, credit cards remain an ace up the sleeve of the biggest lenders.

Write to Telis Demos at

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