In an early assessment of the Federal Reserve’s significant interest rate cut and its impact on the finance sector, the results have been mixed.

JPMorgan Chase and Wells Fargo, two of the country’s largest banks, reported reduced profits on Friday, yet their earnings exceeded expectations. This suggests that the economy remains strong, in line with recent data on employment and inflation, though bank executives cautioned about potential risks on the horizon.

Banks are particularly sensitive to the Fed’s interest rate adjustments, which influence factors like the rates they can charge on deposits and loans. While the Fed’s substantial rate cut last month provided relief to consumers seeking lower rates on mortgages, auto loans, and credit cards, its long-term effects on lenders—who had been benefiting from 20-year-high interest rates—remain uncertain.

JPMorgan’s CFO described the situation as “Goldilocks”: While the bank saw a slight uptick in mortgage applications after the Fed’s cut, the scale of the reduction raised concerns about the economy’s health.

JPMorgan, the largest U.S. bank, earned almost $13 billion in profit last quarter. Though this was slightly lower than the same period last year, it surpassed analysts’ expectations, which had been lowered after JPMorgan warned them last month that their forecasts were overly optimistic.

Wells Fargo reported $5.1 billion in earnings for the quarter, down 11% from the previous year but still better than predicted. The bank attributed part of the decline to customers moving their money to institutions offering higher interest rates, reducing the bank’s earnings on the gap between deposit costs and loan charges.

Wells Fargo also took a $447 million hit from “repositioning” some bond investments, reflecting the shift in interest rates.

JPMorgan noted a 6% increase in debit and credit card spending last quarter but set aside more funds to cover potential cardholder defaults—a trend mirrored at Wells Fargo.

Despite these challenges, both banks saw their stock prices rise on Friday, though future prospects are uncertain. Notably, famed investor Warren Buffett has been reducing his holdings in large banks, including over $1 billion in Bank of America stock in recent months.

A major concern for the banking industry is the fragile state of commercial real estate, particularly loans to office-building landlords struggling with rent collection as many tenants adopt hybrid work models. Wells Fargo’s CFO, Mike Santomassimo, highlighted office-building loans as the bank’s biggest area of risk, though the percentage of commercial loans unlikely to be repaid dropped slightly last quarter. He cautioned that this small improvement was not indicative of a broader recovery, stating, “This will take time to resolve.”

Further risks include the escalating conflict in the Middle East and the looming U.S. presidential election. JPMorgan’s CEO, Jamie Dimon, expressed his concerns in prepared remarks, describing the geopolitical situation as “dangerous and worsening.”

As for his response, Dimon—who has previously criticized leaders for avoiding public policy issues—declined to comment on political matters during a call with reporters. When asked if he had spoken with the two major U.S. presidential candidates, he sidestepped the question, stating that he would not engage in political discussions.