What's going on?

Three giant US banks reported expectation-shattering results on Friday.

What does this mean?

After Silicon Valley Bank�s collapse triggered a banking crisis last month, all eyes were on JPMorgan (JPM), Citigroup, and Wells Fargo�s results, as rough indicators of the sector’s general health. And the results were surprisingly good at first glance. Sure, deposits at JPM and Wells shrank compared to the same period last year, and Citi’s stayed flat, but it wasn�t all bad news: higher interest rates boosted their net interest income � that�s money they make from loans, minus payouts on deposits � by an impressive 49% for JPM, 45% for Wells, and 23% for Citi. That helped soften the blow of downturns in areas like investment banking, hampered by sluggish deal-making and tepid stock markets. In the end, then, all three banks managed to outdo expectations for revenue and profit last quarter.

Why should I care?

For markets: Gathering storm.
JPMorgan said the US economy is faring well overall, but it did warn of “storm clouds” on the horizon. That�s a common feeling, too: all three behemoths upped their reserves for bad loans, and that move�s pretty telling. Remember, these banks have their fingers in every part of the economic pie, so if they’re all treading carefully, it�s probably for good reason. That could explain why the US stock market barely budged after the news, despite the banks’ impressive headline digits.

The bigger picture: Domino effect.
If recent tremors make banks more selective with their lending, then they could make a downturn more likely. After all, increased choosiness would tighten the noose on borrowing for consumers and businesses, who are already dealing with high interest rates. And while big corporations, cushioned by sizable cash reserves, might be all right at first, smaller businesses could soon find themselves in hot water. Those underdogs are the lifeblood of the US economy, though � so everyone else could follow suit.