Defying the Surveys

Banks report a resilient quarter – and a lurking threat

With no physical inventory to account for or supply chains to reconcile, financial companies are quick to report once the quarter is over. This week, we’ve had a deluge of earnings releases as banks and asset managers have rushed to update investors how they got on in the first few months of the year. In a period characterized by uncertainty – around AI-driven disruption, private credit risk and the conflict in the Middle East – the perspective of bank executives provides a useful window on the state of the economy.

So what are they seeing?

First, on the consumer. Last week, the University of Michigan reported its lowest-ever reading on its consumer sentiment survey. The university has been conducting this survey for 74 years and April’s reading came in below anything registered during the global financial crisis, peak Covid or the period of stagflation in the 1980s. While inflation has fallen from its highs, price levels remain high and many respondents cite this as a reason for poor personal finances. Higher gas prices don’t help.

But what consumers say and how they behave are different. “I don’t know that we can square for you the headline surveys on consumer confidence or small business confidence, which are all not great, how we square that with what we actually see,” said Bill Demchak, CEO of PNC Financial Services Group. “When you look through spending patterns, growth in savings, activity levels, loan growth, like everything we see day-to-day in our business is almost at complete odds with the surveys you see on confidence.”