Garnet Capital Advisors Blog

JPMorgan Chase recently caused a stir by announcing that utilization rates for its commercial credit lines moved higher in the first half of this year.

Rising credit utilization supports rosy outlook
These rates climbed to 33 percent by June 30, up from 30 percent at the end of 2013, according to American Banker. Usually, industry participants view such an increase as a signal that loan origination will grow. CEO Jamie Dimon is optimistic about the U.S. economy's performance in the second half, and these latest figures help support his rosy outlook, the media outlet reported.

"It is a modest economy which is modestly getting better," he said during a call with members of the media, according to the news source. "You are all too depressed sometimes."

US economic growth surges in Q2
Several other economic figures support such views, as Commerce Department data recently showed the U.S. economy grew at an annualized rate of 4 percent in the second quarter.

Many market participants expressed concerns that the nation's recovery was stalling when the government agency reported a sharp drop in growth during the first quarter, but the most recent figures showed that gross domestic product shrank 2.1 percent in the first three months of the year, far less than originally estimated.

Yellen paints picture of robust economy
Statements made at the Federal Reserve's annual meeting at Jackson Hole, Wyoming, also contributed to a positive outlook, as Chair Janet Yellen said that both the economy and labor market are improving, according to Investing.com.

She made these comments after the minutes for the Federal Open Market Committee's July meeting showed certain policymakers believe current economic conditions justify winding down existing policy stimulus, the media outlet reported.

Banking CEOs upbeat
Amid these developments, the CEOs of many major banks are providing a positive economic outlook, according to American Banker. Michael Corbat, chief executive of Citigroup, stated that even though the major financial institution's second-quarter revenue fell 6 percent from the same time in 2013, he and his coworkers are "feeling better" and predict rising revenue in the second half of this year.

John Stumpf, CEO of Wells Fargo, emphasized his positive sentiment even though the company saw its earnings decline after 17 quarters of consecutive growth, the media outlet reported.

"While the economic recovery remains uneven ... there are many indicators that economic growth is accelerating, and we remain optimistic about the opportunities the recovery provides for Wells Fargo and for our customers," he stated during a conference call with analysts, according to American Banker.

Stumpf emphasized that energy production, auto sales and the job market are all robust in the U.S., the media outlet reported. Highlighting these recent bright points are part of a longer-term trend, as he has been optimistic about the American economy for several quarters.

Of all the major bank CEOs who have been emphasizing their positive outlooks, Dimon's view seems far more credible because of JPMorgan Chase's uptick in credit utilization, FBR Capital Markets analyst Paul Miller told American Banker.

"Wells didn't report that, Citi didn't report that," Miller told the news source. "I think now that JPMorgan has, every bank that releases and hosts a call will be asked about utilization as the first question. This is an important change. They are all always optimistic and say things like, 'I know loan data doesn't show it, but everyone says they are going to borrow money this quarter.'"