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U.S. banks beat profit estimates on economic rebound, red-hot markets By Reuters

© Reuters. FILE PHOTOS: Signs of JP Morgan Chase Bank, Citibank and Wells Fargo & Co. bank are seen in this combination photo from Reuters files. REUTERS/File photos


By Michelle Price

WASHINGTON, (Reuters) – The rebounding economy enabled the four biggest U.S. bank consumer banks to release additional cash for potential pandemic losses. Additionally, they were able to make more deals and equity financing, which helped boost their bottom line.

JPMorgan Chase & Co (NYSE:), Citigroup (NYSE:), Well Fargo & Co and Bank of America Corp (NYSE:), seen by analysts and economists as bellwethers of the broader economy, reported a combined profit of $28.7 billion for the third quarter, beating analyst estimates.

The release of $6 billion combined of bank funds for loan loss prevention in the event of an epidemic led to a large part of this. This has been made possible by extraordinary government stimuli, assistance programs, and loan repayment holiday.

According to the banks, consumers have seen a boom in spending after the nationwide vaccination roll-out, which allowed Americans to resume work and socialize following 19 months of travel restrictions.

Analysts closely monitor loan growth. However, Wall Street was not as consistent in its monitoring. Lenders are having trouble growing their loan portfolios as both consumers and companies, who have access to cash through government programs, pay off loans.

Executives were generally cautiously optimistic, however, that the economy was on a positive trajectory.

“The recovery from the pandemic continues to drive corporate and consumer confidence,” Citigroup CEO Jane Fraser said in a statement. While strong consumer balances have had an impact on lending, we see higher consumer spending in our card products.

JPMorgan reported that combined credit and debit card spending increased by 26% over the previous year. Card payment rates stabilised, which contributed to modest growth in card loans. Bank of America saw a 21% increase in combined credit-debit card spending.

The United States saw a 24% increase in spending on Citi-branded credit accounts, but due to so many customers repaying balances, net interest revenue from credit cards fell by 3%. As a sign of the changing trend, net interest revenue from cards rose 5% in the second quarter.

Sizzling capital markets over the past six months have also buoyed the country’s largest lenders, with easy monetary conditions driving record-breaking volumes of both mergers and acquisitions (M&A) and initial public offerings, fueling fees.

Biggest investment bank Morgan Stanley (NYSE:) Inc beat all estimates Thursday with a staggering $3.58 billion profit. That’s almost 38% higher than in the previous quarter. The record revenue of $1.27B from deals advising was a major reason for this.

“The investment bank, itself, and M&A, is on fire,” Gorman said in an interview with CNBC after the results. We’ve seen record-low interest rates, huge fiscal stimulus and global GDP growth. Transacting is what people want.”

The highlight for JPMorgan’s third quarter was also its Corporate & Investment Bank division, where advisory fees almost tripled due to strong M&A and equity underwriting. The net revenue of that division rose 6% to $12.4 billion.

Bank of America saw its revenue for the equities business increase by 33%, due to strong trading performances and client financing. Citigroup reported that its equity market revenues had increased 40%.

Goldman Sachs, Wall Street’s most prolific dealmaker (NYSE:), will conclude bank earnings season this Friday.

Although consumer spending and capital markets were strong, the loan growth was mixed.

JPMorgan announced Wednesday that loans increased by 5% on average across its bank, compared to the previous year. Citi and Bank of America also reported higher loan growth. Wells Fargo (NYSE) reports a decrease in loan growth over the past year.

Mike Robinson
Mike covers the financial, utilities and biotechnology sectors for Street Register. He has been writing about investment and personal finance topics for almost 12 years. Mike has an MBA in Finance from Wake Forest University.