US banks outperform earnings estimates in economic recovery, red-hot markets


WASHINGTON, Oct. 14 (Reuters) – The four largest U.S. consumer banks had another strong quarter this week as the recovering economy allowed them to free up more money they’d allocated for pandemic losses while doing sticky deals, equity financing and trading activity also her lower lines.

JPMorgan Chase & Co (JPM.N), Citigroup (CN), Well Fargo & Co (WFC.N), and Bank of America Corp (BAC.N), viewed by analysts and economists as the guiding stars of the overall economy, reported one combined profit of $ 28.7 billion for the third quarter, beating analyst estimates.

Much of that was due to the release of a total of $ 6 billion in funds the banks had allocated to cover loan losses due to the pandemic, which did not materialize thanks to exceptional government incentives, relief programs and loan repayment vacations.

With the national rollout of vaccination, which allows Americans to get back to work and socialize after 19 months of pandemic business closings and travel restrictions, consumer spending has spiked, banks said.

However, credit growth, a key metric closely watched by analysts, was mixed on Wall Street. Some lenders are still struggling to grow their loan books as consumers and businesses filled with money from government aid programs continue to repay loans.

Overall, however, executives were cautiously optimistic that the economy was on a healthy path.

“The recovery from the pandemic continues to build confidence from businesses and consumers,” said Jane Fraser, CEO of Citigroup, in a statement. “And while strong consumer balance sheets have impacted lending, we are seeing higher consumer spending on our card products.”

JPMorgan said that combined debit and credit card spending increased 26% year over year, while card payment rates stabilized and contributed to modest growth in card credit. At Bank of America, combined credit and debit card spending increased 21%.

FILE PHOTOS: This combination photo from Reuters files shows signs of JP Morgan Chase Bank, Citibank and Wells Fargo & Co. REUTERS / file photos

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Spending on Citi-branded credit cards in the United States was up 24% year over year, but with so many customers checking out their balances, net interest income on credit card accounts decreased 3%. As a sign that the trend may turn, net interest income on the cards rose 5% from the second quarter.

The buoyant capital markets over the past six months have also boosted the country’s largest lenders, with simple monetary conditions generating record-breaking volumes in both M&A and IPOs and fueling fees.

Investment banking giant Morgan Stanley Inc (MS.N) put down estimates on Thursday and reported a profit of $ 3.58 billion, nearly 38% more than in the prior-year quarter. This was in large part due to record sales of $ 1.27 billion from advising on deals. Continue reading

“The investment bank itself and M&A are on fire,” Gorman said after the results in an interview with CNBC. “We have global GDP growth, huge fiscal incentives, record low interest rates. People want to do business.”

The high point of JPMorgan’s third quarter was also its Corporate & Investment Bank division, where advisory fees nearly tripled due to heavy M&A and equity buyouts. Overall, this division posted a 6% increase in net sales to $ 12.4 billion. Continue reading

At Bank of America, equity revenue grew 33% year-over-year, driven by growth in retail financing activities and strong trading performance, while Citigroup claims its stock market revenues are up 40%. Continue reading

Goldman Sachs (GS.N), Wall Street’s most prolific dealmaker, will close the banks’ profitable season on Friday.

While consumer spending and capital markets shone, credit growth remained mixed.

JPMorgan said Wednesday that the bank’s lending rose an average of 5% year-over-year, while Bank of America, Citi and Wells Fargo reported year-over-year decline in lending growth.

Letter from Michelle Price; Reporting by Anirban Sen, Noor Zainab Hussain, Matt Scuffham, David Henry and Elizabeth Dilts Editing by Nick Zieminski

Our Standards: The Thomson Reuters Trust Principles.

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