12:00 PM EDT, 10/18/2024 (MT Newswires) -- US banks reported quarterly earnings that beat Wall Street estimates, boosting prospects that the Federal Reserve is guiding the economy successfully to a soft landing, analysts said.

The third-quarter profit beats by JPMorgan ( JPM ) , Bank of America ( BAC ) , Citigroup ( C ) and Wells Fargo (WFC) eased concerns that the Fed's strategy on interest rates would push the country into a recession. The central bank cut rates last month for the first time after a series of increases since March 2022 to tame inflation.

"Sentiment and commentary around banks are notably strong," Suryansh Sharma, an equity analyst at Morningstar, said in an interview. "Except for [net interest margin] compression in some cases, everything looks reasonably decent for banks in the near term, as the market is completely sold on the soft-landing story."

While loan growth remains tepid, the big banks generally reported improvements in deposit and credit costs, solid fee income and mildly higher expenses, Sharma said.

Investors focused on net interest income, the largest source of revenue at the banks. NII measures the difference between the amount of interest banks earn on loans versus how much they pay on deposits.

The Big Four benefited from the high-rate environment of the past two years, generating a combined record $250 billion in 2023, Bloomberg News reported.

The halcyon NII days appeared to be over after the Fed in September cut its benchmark rate by 50 basis points. Earlier that month, JPMorgan ( JPM ) Chief Operating Officer Daniel Pinto said the Wall Street consensus for his company's 2025 NII of $90 billion "is not very reasonable because the rate expectation is lower by 250 basis points. So I think that number will be lower."

The consensus for JPMorgan's ( JPM ) 2025 NII, excluding markets, of $87 billion "still looks a little toppy, but it's definitely in the ballpark," Chief Financial Officer Jeremy Barnum said on an earnings call with analysts.

Wells Fargo ( WFC ) expects Q4 NII to be mostly in line with the Q3 figure of $11.69 billion, which fell 2% from Q2 and implies a 9% decline in full-year NII from 2023.

Bank of America ( BAC ) on Tuesday reported NII of $14.1 billion in the third quarter, up from $13.9 billion in the previous quarter, confirming prior guidance that the second quarter would be the NII nadir. In the fourth quarter, the bank expects NII to grow to $14.3 billion, assuming two rate cuts of 25 basis points in November and December by the Fed, CFO Alastair Borthwick said.

Citigroup ( C ) on Tuesday reported NII of $13.36 billion in the third quarter, down from $13.49 billion in previous quarter and $13.83 billion a year earlier. Excluding markets, NII was up $500 million from Q2 to $11.96 billion.

Still, positive earnings data and guidance from large banks combined to paint a sanguine picture of the banking industry and the US economy.

"Whatever you want to call the US [landing], the sentiment around it is more optimistic, supported by the recent positive payrolls report, and we see a healthy yet more discerning US consumer and the US corporate sector on the front foot," Citigroup ( C ) CEO Jane Fraser said on a call with analysts.

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