Key U.S. Systemically Important Banks and Their Q3 Results
Under Basel III criteria, the United States has eight globally systemically important banks: JPMorgan Chase & Co. (JPM), Citigroup Inc. (C), Bank of America Corporation (BAC), The Goldman Sachs Group, Inc. (GS), Morgan Stanley (MS), Wells Fargo & Company (WFC), The Bank of New York Mellon Corporation (BK), and State Street Corporation (STT). These are ranked by importance.
Here are the total reported revenues for Q3 2022:
- JPM: US$46,427 million (+8.8% a/a)
- C: US$22,090 million (+9.3% a/a)
- BAC: US$28,088 million (+10.8% a/a)
- GS: US$15,184 million (+19.6% a/a)
- MS: US$18,224 million (+18.5% a/a)
- WFC: US$21,436 million (+5.3% a/a)
- BK: US$5,081 million (+9.3% a/a)
- STT: US$3,545 million (+8.8% a/a)
The contribution of the net interest margin to total revenues is as follows:
- JPM: 52%
- C: 68%
- BAC: 54%
- GS: 25%
- MS: 14%
- WFC: 56%
- BK: 24%
- STT: 20%
Interest Rate Movements and Fed’s Balance Sheet Policy
These quarterly results highlight the significance of interest rate movements and anticipated changes in upcoming Federal Open Market Committee (FOMC) meetings of the Federal Reserve (FED). This impacts not only reference rates but also the policy of reducing total assets on the balance sheet.
As of August 28, 2019, the FED’s total assets were US$3.76 trillion; by April 13, 2022, this figure reached US$8.97 trillion; and by October 22, 2025, it was US$6.59 trillion.
The increase during the first period, known as Quantitative Easing (QE), involves expanding the FED’s balance sheet by purchasing long-term government bonds from commercial banks and creating bank reserves to facilitate this process. The decrease during the second period, called Quantitative Tightening (QT), involves reducing the FED’s balance sheet through the reverse process.
Current QT and Liquidity Restrictions
The ongoing QT has not shown signs of liquidity restrictions until recently. The difference between the Secured Overnight Financing Rate (SOFR) and the interest rate on bank reserves at the FED (IORB) had been negative for the past five years. However, this differential has turned positive since September and has continued to rise over the past two weeks.
This means that demand for reserves is pushing the SOFR higher than the IORB. If the FED aims to balance liquidity demand with supply, it is likely that they will reverse QT and increase bank reserves.
Key Questions and Answers
- What are the systemically important banks in the U.S.? According to Basel III criteria, these are JPMorgan Chase & Co., Citigroup Inc., Bank of America Corporation, The Goldman Sachs Group, Inc., Morgan Stanley, Wells Fargo & Company, The Bank of New York Mellon Corporation, and State Street Corporation.
- What were the Q3 2022 total reported revenues for these banks?
- JPM: US$46,427 million (+8.8% a/a)
- C: US$22,090 million (+9.3% a/a)
- BAC: US$28,088 million (+10.8% a/a)
- GS: US$15,184 million (+19.6% a/a)
- MS: US$18,224 million (+18.5% a/a)
- WFC: US$21,436 million (+5.3% a/a)
- BK: US$5,081 million (+9.3% a/a)
- STT: US$3,545 million (+8.8% a/a)
- How do net interest margins contribute to total revenues for these banks?
- JPM: 52%
- C: 68%
- BAC: 54%
- GS: 25%
- MS: 14%
- WFC: 56%
- BK: 24%
- STT: 20%
- What is the significance of interest rate movements and Fed’s balance sheet policy? These quarterly results emphasize the importance of interest rate adjustments and anticipated changes in FOMC meetings, impacting both reference rates and the reduction of total assets on the balance sheet.
- What is Quantitative Easing (QE) and Quantitative Tightening (QT)? QE refers to the FED’s balance sheet expansion through long-term government bond purchases from commercial banks and reserve creation. QT is the reverse process, reducing the FED’s balance sheet.
- Why might the FED reverse QT and increase bank reserves? As the differential between SOFR and IORB has turned positive, indicating increased demand for reserves pushing SOFR above IORB, the FED may reverse QT to balance liquidity demand with supply by increasing bank reserves.
