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New York (AFP) – Clients of giant US banks are increasingly nervous about growing trade tensions, but are not yet significantly curtailing business activity due to the uncertainty, banks said Friday after reporting mixed earnings.

JPMorgan Chase chief executive Jamie Dimon cautioned that “There are unpredictable outcomes when you start skirmishes like this with multiple countries.”

“It’s a worry,” he told reporters in a conference call, but “I don’t know if I’d use the word ‘major’ yet.”

Citigroup chief financial officer John Gerspach agreed with his counterparts that the concerns are not yet driving business decisions. 

“When you get into this kind of rhetoric, it does impact sentiment,” he said. “It’s going to slow down decision making in some cases, but that hasn’t translated yet into anything we’ve seen.”

The comments came as the two major US banks reported earnings that easily topped analyst expectations, in contrast to slumping Wells Fargo which badly underperformed forecasts.

The banks are among the first major companies to report results in what is expected to be a strong second-quarter earnings season thanks to US tax cuts and a humming American economy.

However, a series of trade battles launched by US President Donald Trump against key trading partners, including China and the European Union, have clouded the overall business outlook.

Another worry particular to bank stocks is whether the benefits from higher Federal Reserve interest rates are ebbing. Higher interest rates boost bank profits by allowing them to charge more for loans. However, as rates continue to rise, banks also must pay more to depositors.

A note from S&P Global credit analyst Brendan Browne this week warned that the gains for banks from higher interest rates “are likely to diminish, because we expect deposit rates to rise more materially over the next year.”

JPMorgan, the biggest US bank by assets, reported an 18.3 percent surge in net income compared to the year-ago period to $8.3 billion. Revenues came in at $28.4 billion, up 6.5 percent.

Highlights included increases in net interest income following two Fed rate hikes this year, and a rise in overall loans compared with the year-ago period, a sign of strengthening economic conditions.

– More regional trade? –

Citigroup profits jumped 16 percent in the second quarter to $4.5 billion due to overall loan growth and lower tax payments. Both main divisions, global consumer banking and institutional client services, had higher profits.

Revenues came in at $18.5 billion, up two percent.

Gerspach said Citigroup has seen an uptick in activity within Asia that could pick up further if the US-China clash worsens.

“If it does emerge that there is some slowdown in trade between China and the US, what we are seeing is that there is growth in trade flows elsewhere in the world,” he said. “In particular, we’re seeing a lot of growth in trade flows just in Asia corridor.”

Citigroup has hired additional staff for China desks in India and South Korea, Gerspach said. 

The big laggard was Wells Fargo, which still has not completely found its footing following a fake accounts scandal that surfaced in 2016, prompting numerous fines, government probes and lawsuits.

Net income fell 11.4 percent to $5.2 billion, and there was a drop in overall deposits and loans. 

On the positive side, the company notched an increase in net interest income, indicating it also benefited from higher interest rates.

Wells Fargo has replaced key executives, revamped some pay incentive policies to improve governance and spent on marketing to emphasize these improvements.

“During the second quarter we continued to transform Wells Fargo into a better, stronger company for our customers, team members, communities and shareholders,” said Wells Fargo chief executive Tim Sloan.

Shares of JPMorgan were up 0.1 percent in late morning trading on Wall Street, while Citigroup dropped 3.0 percent and Wells Fargo shed 3.0 percent.

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