Emerging markets continue to modernize while developed countries are enjoying economic expansions in 2018, providing confidence for large U.S. banks with multinational operations, executives say.
Top managers at JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. said they are encouraged by solid economic fundamentals in the U.S. and parts of Europe, as well as long growth runways for emerging markets such as Mexico and China.
Mexico's population expansion, swelling middle class and rising demand for banking services make the country a growth engine for Citi, the bank's global consumer banking CEO Stephen Bird said. He also said the Trump administration's threats to renegotiate the North American Free Trade Agreement could hinder the bank's customers. Citi manages roughly a fourth of all of Mexico's financial transactions.
"Mexican customers are still going to be borrowing, paying, saving, investing and protecting in pesos no matter what happens, so we feel that Mexico is a good opportunity," Bird said during a presentation May 29 at the Deutsche Bank Global Financial Services Conference in New York.
He also was upbeat on emerging markets in Asia and on consumer lending opportunities in the U.S. Citi is planning to launch a national digital banking platform. When it starts to market the offering later this year, Bird said Citi will not rely on paying higher rates to win new U.S. depositors. Instead, it will look to attract deposits from its existing credit card customers. For example, he said, Citi could offer such customers additional American Airlines mileage if they open deposit accounts.
"Until now," Bird said, "nobody has said to them, 'Why don't you also earn those same miles on your checking and savings account?' You're going to be able to do that."
Daniel Pinto, co-president and co-COO of JPMorgan, said at the same conference that the banking giant's commercial clients are optimistic about their own outlooks. While that has not yet translated into surges in loan demand, investment banking or markets services this year, he sees "a solid environment for growth" in the U.S. and other developed countries. He also sees broadening opportunities in rapidly emerging countries, including heavily populated China.
"I think that China will be a big growth opportunity in the future, and we are investing," Pinto said. "We're seeing growth in payments. We are seeing growth in investment markets. I'm quite excited about Asia overall."
Separately, Pinto said trading revenue for the second quarter is likely to be only flat from a year earlier, owing to one-off charges on taxes and accounting rule changes.
Alastair Borthwick, head of Bank of America's global commercial banking operation, said at the conference that the outlook for loan demand, particularly in the U.S., is favorable. He said the outlook is, however, muddied somewhat by the fact that many growth-minded businesses are better equipped to spend cash rather than borrow to make investments following a late 2017 federal tax cut.
He said BofA's lending is rising this year and that its pipelines are more robust at this point in the second quarter than they were a year earlier. "But I think it's very difficult to predict [loan] growth right now," he said. Borthwick said customers may choose to stockpile cash and borrow to make investments. Or, he said, they may opt to keep debt levels low by using excess cash now. But either way, he said, more commercial clients are looking to invest in growth. In the long run, such investment tends to fuel economic cycles in which big banks typically grow lending.
"What's definitely true, from talking to CEOs around the country, is they're more optimistic about the economy," Borthwick said. "They're more optimistic about their companies' prospects. … And that tends to be good for our [loan] balances over time."
