WASHINGTON, July 14 – The four largest U.S. consumer banks posted blockbuster second-quarter results this week, after pandemic loan losses failed to materialize and the U.S. economy began roaring back to life.
Wells Fargo & Co (WFC.N), Bank of America Corp (BAC.N), Citigroup Inc (C.N) and JPMorgan Chase & Co (JPM.N) posted a combined $33 billion in profits, buoyed by the release of reserves they had put aside last year to absorb feared pandemic losses.
That was beyond analyst estimates of about $24 billion combined, compared with $6 billion in the year-ago quarter.
Consumer spending has climbed, sometimes beyond pre-pandemic levels, while credit quality has improved and savings and investments have risen, the banks said.
Thanks to extraordinary government stimulus and loan repayment holidays, feared losses have not materialized. A national vaccination roll-out has allowed also Americans get back to work and to start spending again.
Sizzling capital markets activity has also helped the largest U.S. banks, with Goldman Sachs Group Inc (GS.N) reporting a $5.35 billion profit, more than double its adjusted earnings a year ago.
“The pace of the global recovery is exceeding earlier expectations and with it, consumer and corporate confidence is rising,” Citigroup Chief Executive Officer Jane Fraser said.
That was reflected in a pick-up in consumer lending.
For example, JPMorgan’s combined debit and credit card spending was up 22% compared with the same quarter in 2019, when spending patterns were more normal.
Wells Fargo posted a 14% gain in credit-card revenue compared with the second quarter of 2020, due to higher point-of-sale volume. Revenue was up slightly on the first quarter, the bank said.
While loan growth is still tepid, which is usually bad for bank profits, there were signs that demand is creeping back.
Excluding loans related to the U.S. government’s pandemic aid program, loan balances at Bank of America, for example, grew $5.1 billion from the first quarter.
“Consumer spending has significantly surpassed pre-pandemic levels, deposit growth is strong, and loan levels have begun to grow,” Chief Executive Officer Brian Moynihan said in a statement.
JPMorgan, the country’s largest lender, on Tuesday reported profits of $11.9 billion compared with $4.7 billion last year.
Citigroup’s second-quarter profit rose to $6.19 billion, up from $1.06 billion last year, while Bank of America’s profit jumped to $8.96 billion from $3.28 billion.
Wells Fargo posted a profit of $6 billion compared with a loss of $3.85 billion last year, which was largely related to special items.
While the results indicate good trends for consumers and businesses, low interest rates, weak loan demand and a slowdown in trading will probably weigh on results going forward, analysts said.
The U.S. Federal Reserve is staying the course, with an inflation target of 2% and no plans to tighten monetary policy by, for instance, raising interest rates, Fed Chair Jerome Powell said in prepared remarks for a congressional appearance on Wednesday.
That suggests banks will have to deal with low rates for an extended period of time.
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