The major US banks reported quarterly earnings last week. The expected decline in investment banking was largely offset by higher net interest income.

Efforts by the Federal Reserve to fight inflation are clearly helping the banking sector's interest margins. At least that is what JP Morgan, Morgan Stanley, Citigroup, and Wells Fargo's second quarter performance shows.

Net interest income came in above analyst expectations for all four banks, as «Bloomberg» indicated Monday and. as a result, some subsequently raised their full-year outlook.

«Higher loan balances and higher rates are definitely helping us have a better result», Mike Santomassimo, the bank's chief financial officer, told the news service.

Elevated rates have made core banking businesses more profitable but at the same time, consumer demand for credit and lending is expected to fall at some point for the very same reason.

Higher Earnings But...

JP Morgan, the largest North American bank, saw net interest income improve in the second quarter by 19 percent. That was a result of higher rates and credit growth. Analysts had forecast growth of 16 percent.

The sky generally seems to be lightening up. JP Morgan now forecasts $58 billion in net interest income for this year after predicting in May the year-end result would be closer to $56 billion. Wells Fargo believes interest-related earnings will be up by 20 percent while Morgan Stanley reckons with an extra $500 million coming in over the next two quarters.

Citigroup CFO Mark Mason said on Friday that net interest income in the first half was up by $1.8 billion dollars compared with the same period in 2021 and that he expects a similar performance for the remainder of the year.

Swiss also Profit

Swiss banks are also likely to benefit from higher interest margins. The provincial hinterlands far from Wall Street seem to sprout the same green shoots. The Cantonal Bank of Jura and that of Appenzell have released figures, and they reported higher net interest income. Margins were at 3.9 percent in interest-bearing businesses, a full 1 percentage point improvement. It will be interesting to see how the larger lenders do in when they release results even though the full impact of higher interest rates will likely only be fully felt in upcoming quarters.