NEW YORK: A trio of US banks reported strong profits Wednesday, boosted by the improved credit quality outlook despite headwinds from lower interest rates and tepid trading revenues.
Results from Bank of America, Citigroup and Wells Fargo followed similarly positive earnings released Tuesday from Goldman Sachs and JPMorgan Chase, with the bottom line surging in comparison to the year-ago period when the industry set aside billions of dollars in case of loan defaults during the coronavirus pandemic.
Banks note that the pandemic, along with rising inflation, remains a source of economic uncertainty. But the doomsday scenario of a deluge of client defaults has not happened, thanks in large part to the reopening of the US economy brought on by the widespread availability of coronavirus vaccines. “The pace of the global recovery is exceeding earlier expectations and with it, consumer and corporate confidence is rising,” said Citi Chief Executive Jane Fraser. “While we have to be mindful of the unevenness in the recovery globally, we are optimistic about the momentum ahead.”
At Citi, profit in the second quarter came in at $6.2 billion, more than five times the year-ago level when Citi set aside large provisions. This time, Citi released $2.4 billion of those reserves.
Revenues fell 12 percent to $17.5 billion, due in part to a big drop in trading revenues.
Bank of America’s results were also boosted by reserve releases, as a strong performance in dealmaking kept investment fees near record levels. “Consumer spending has significantly surpassed pre-pandemic levels, deposit growth is strong and loan levels have begun to grow,” said BofA Chief Executive Brian Moynihan. The bank reported second-quarter profits of $9 billion, more than double the year-ago level. Revenue fell four percent to $21.5 billion.
Wells Fargo reported profits of $6 billion, compared with a loss of $3.8 billion in the year-ago period. Revenues rose 11 percent to $20.3 billion.