Biggest U.S. banks crush earnings estimates as economy picks up

WASHINGTON, July 14 (Reuters) – America’s four largest consumer banks this week released successful second quarter results after pandemic loan losses did not materialize and the US economy began to recover life.

Wells Fargo & Co (WFC.N), Bank of America Corp (BAC.N), Citigroup Inc (CN) and JPMorgan Chase & Co (JPM.N) posted combined profit of $ 33 billion, supported by unlock $ 9 billion in reserves they set aside last year to absorb feared pandemic losses.

That topped analysts’ estimates by around $ 24 billion combined, down from $ 6 billion in the quarter last year.

Consumer spending has increased, sometimes beyond pre-pandemic levels, as credit quality has improved and savings and investments have increased, banks said.

Thanks to the government’s extraordinary stimulus measures and loan repayment holidays, the feared pandemic losses did not materialize. A nationwide rollout of immunization has also allowed Americans to get back to work and start spending again.

Sizzling capital markets activity has also helped America’s biggest banks, with Goldman Sachs Group Inc (GS.N) reporting profit of $ 5.35 billion, more than double its adjusted profit a year ago. year. Read more

“The pace of the global recovery is exceeding previous expectations and with it, consumer and business confidence is rising,” said Jane Fraser, CEO of Citigroup.

This was reflected in a recovery in consumer lending.

For example, JPMorgan said combined spending on its debit and credit cards increased 22% from the same quarter in 2019, when spending patterns were more normal.

Spending on Citi-branded credit cards in the United States jumped 40% from the previous year, but with so many customers paying off their balances, its card loans fell 4%. Read more

Citigroup CFO Mark Mason said the bank expects more customers to revert to their pre-pandemic model of carrying revolving balances as government stimulus packages end later this year.

Wells Fargo reported a 14% gain in credit card revenue from Q2 2020, due to higher volume at point-of-sale. Revenue increased slightly from the first quarter, the bank said. Read more

“What we are seeing is that people are starting to spend and act more in a way that looks more like it was before the pandemic started and certainly on the consumer side the spending has dramatically increased. increased, even if you compare them to 2018, “Wells Fargo CFO Mike Santomassimo told reporters.

While loan growth is still subdued, which is generally bad for bank profits, there are signs that demand is declining.

Excluding loans related to the U.S. government’s pandemic assistance program, loan balances at Bank of America, for example, were up $ 5.1 billion from the first quarter. Read more

“Deposit growth is strong and loan levels have started to rise,” Bank of America CEO Brian Moynihan said in a statement.

JPMorgan, the country’s largest lender, reported profits of $ 11.9 billion on Tuesday, up from $ 4.7 billion last year.

Citigroup’s second-quarter profit reached $ 6.19 billion, from $ 1.06 billion last year, while Bank of America profit jumped to $ 8.96 billion from $ 3.28 billion of dollars. Read more

Wells Fargo posted a profit of $ 6 billion compared to a loss of $ 3.85 billion last year, which was largely related to special items.

While the results point to good news for consumers and businesses, low interest rates, weak demand for loans and a slowdown in trade are likely to weigh on results going forward, analysts said.

The US Federal Reserve is staying the course, with a 2% inflation target and no plans to tighten monetary policy, for example by raising interest rates, Fed Chairman Jerome Powell said in comments. remarks prepared for an appearance in Congress Wednesday. Read more

This suggests that banks will have to deal with low rates for an extended period.

Reporting by Michelle Price; additional reporting by Noor Zainab Hussain, David Henry and Matt Scuffham; Editing by Lauren Tara LaCapra and Nick Zieminski

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