NEW YORK: Profits soared in the first quarter at three US banking giants thanks to an improving macroeconomic backdrop that has reduced the need to set aside funds for bad loans.
Profits from JPMorgan Chase, Goldman Sachs and Wells Fargo were all at least four times the level in the year-ago period, boosted in part by reserve releases of funds set aside earlier in the pandemic in anticipation of a big downturn.
Results from JPMorgan and Goldman Sachs were also lifted by a blowout quarter in Wall Street trading and deals connected to companies going public.
Bank CEOs offered a heady outlook on the expected boom-like conditions in the coming months, but cautioned that there were challenges ahead as pent-up demand for goods, services and experiences drives activity.
“We think we’re going to have very robust economic growth in the second half of 2021 and into 2022,” Goldman Sachs Chief Executive David Solomon said on a conference call with analysts.
At JPMorgan Chase, earnings came in at $14.3 billion, about five times the level from the year-ago period. The result included $5.2 billion from releases of funds set aside earlier in the pandemic due to fears of bad loans.
Revenues of $33.2 billion were up 14 percent from the year-ago period.
JPMorgan, the largest US bank by assets, turned in an especially strong performance in corporate and investment banking, thanks to gains in advisory fees and a big increase in commissions tied to trading in financial markets.
In consumer banking, JPMorgan pointed to a return in consumer spending to pre-pandemic levels. Home lending originations were strong, but the bank expects this area to cool with higher interest rates.
JPMorgan’s credit card loans fell 14 percent compared to the year-ago period and wholesale loans also dropped.
At Goldman, profits came in at $6.8 billion, more than five times the earnings in the year-ago period, while revenues more than doubled to $17.7 billion — both setting quarterly records.
The results included a boost of $70 million in reduced provisions for credit losses.
Goldman cited robust public stock offerings and a heavy slate of merger and acquisition activity as drivers of the strong performance in investment banking. Goldman also scored higher fees tied to underwriting for clients raising equity and debt.
The New York bank garnered a 47 percent rise in global markets revenues from the year-ago period to $7.6 billion, the highest since 2010.
At Wells Fargo, which has a much smaller investment banking business compared with JPMorgan and Goldman, profits were $4.7 billion, more than seven times the level a year ago. Revenues rose 2.0 percent to $18.1 billion.
Wells Fargo’s results included a boost of $1.6 billion in reduced provisions for credit losses.
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