U.S. banks beat profit estimates on economic rebound, deals bonanza

WASHINGTON, Oct 14 (Reuters) – The 4 largest U.S. client banks posted one other sturdy quarter this week because the rebounding financial system allowed them to launch extra cash they’d put aside for pandemic losses, whereas scorching deals, fairness financing and buying and selling additionally boosted their backside traces.

JPMorgan Chase & Co (JPM.N), Citigroup(C.N), Well Fargo& Co (WFC.N) and Bank of America Corp(BAC.N), seen by analysts and economists as bellwethers of the broader financial system, reported a mixed profit of $28.7 billion for the third quarter, beating analyst estimates.

Much of that was pushed by the discharge of a mixed $6 billion of funds the banks had put apart for pandemic mortgage losses which haven’t materialized due to extraordinary authorities stimulus, help packages and mortgage compensation holidays.

With the nationwide vaccination roll-out permitting Americans to get again to work and resume socializing after 19 months of pandemic-related enterprise closures and journey restrictions, client spending has boomed, the banks mentioned.

Loan development, a key metric closely-watched by analysts, was combined throughout Wall Street nevertheless. Some lenders are nonetheless struggling to develop their mortgage books as shoppers and companies, flush with money from authorities help packages, proceed to pay down loans.

Overall, although, executives had been cautiously optimistic that the financial system is on a wholesome trajectory, regardless of some dangers on the horizon together with the most recent wave of COVID-19 infections and inflation worries.

“The outlook for the economy is promising,” Wells Fargo Chief Executive Charles Scharf advised analysts on Thursday.

“Consumers’ financial condition remains strong with leverage at its lowest level in 45 years and the debt burden below its long-term average. Companies are also strong as well.”

The financial institution’s clients are flush with money and need to spend he added, noting client clients’ median deposit balances remained above pre-pandemic ranges.

JPMorgan mentioned mixed debit and bank card spend was up 26% year-on-year, whereas card cost charges stabilized contributing to modest card mortgage development. At Bank of America, mixed credit score and debit card spend was up 21%.

Spending on Citi-branded bank cards within the United States jumped 24% from a yr earlier, however with so many shoppers paying off balances internet curiosity income from bank card accounts fell 3%. In an indication that the pattern could also be turning, internet curiosity income on the playing cards was up 5% from the second quarter.

FILE PHOTOS: Signs of JP Morgan Chase Bank, Citibank and Wells Fargo & Co. financial institution are seen on this mixture picture from Reuters recordsdata. REUTERS/File Photos


Sizzling capital markets over the previous six months have additionally buoyed the nation’s largest lenders, with straightforward financial situations driving record-breaking volumes of each mergers and acquisitions (M&A) and preliminary public choices, fueling charges.

That has helped cushion a decline in fastened revenue buying and selling this yr, which was turbo-charged final yr by intense market volatility.

Investment banking large Morgan Stanley Inc (MS.N)crushed estimates on Thursday, reporting a $3.58 billion profit, up almost 38% on the year-ago-quarter. That was thanks largely to a file $1.27 billion in revenues from advising from advising on deals. learn extra

“The investment bank, itself, and M&A, is on fire,” James Gorman, the financial institution’s chief government, mentioned in an interview with CNBC after the outcomes. “We’ve got global GDP growth, enormous fiscal stimulus, record low interest rates. People want to transact.”

The spotlight for JPMorgan’s third quarter was additionally its Corporate & Investment Bank division, the place advisory charges virtually tripled resulting from sturdy M&A and fairness underwriting. All advised, that division reported a 6% rise in internet income to $12.4 billion. learn extra

At Bank of America, income from its equities division rose 33% year-on-year, pushed by development in shopper financing actions and robust buying and selling efficiency, whereas Citigroup mentioned revenues for its fairness markets enterprise had jumped 40%. learn extra

Goldman Sachs (GS.N), Wall Street’s most prolific dealmaker, will wrap up financial institution earnings season on Friday.

While client spending and capital markets shone, mortgage development remained combined.

JPMorgan mentioned on Wednesday that, on common, loans had been up 5% throughout the financial institution in contrast with final yr, whereas Citi was broadly flat. Bank of America and Wells Fargo reported declines in mortgage development year-on-year.

However, lending seemed to be trending in the appropriate course at Bank of America, its CEO Brian Moynihan famous in an announcement. Loan balances had been up $21 billion in contrast with the second quarter of this yr.

“The economy continued to improve and our businesses regained the organic customer growth momentum we saw before the pandemic,” Moynihan added.

Writing by Michelle Price; reporting by Anirban Sen, Noor Zainab Hussain, Sohini Podder, Manya Saini, Matt Scuffham, David Henry, and Elizabeth Dilts
Editing by Nick Zieminski

Our Standards: The Thomson Reuters Trust Principles.

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