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NEW YORK (AP) – Four of the largest U.S. banks said their profits rose double-digit in the last quarter as a healthier U.S. economy allowed banks to have fewer bad debts and write-offs.
But the results of Citigroup, Bank of America, Wells Fargo and Morgan Stanley have benefited from one-off increases in their profits, and low interest rates remain a significant obstacle for the financial titans of Wall Street.
Bank of America said its net profit rose 58% to $ 7.26 billion, or 85 cents per share. That exceeded estimates by Wall Street analysts who were looking for earnings per share of 70 cents, according to FactSet. Meanwhile, Wells Fargo posted a 59% jump in profits from the previous year.
Both banks have benefited from the ability to cancel certain funds set aside at the start of the pandemic in the event of default. These billions of dollars in potentially distressed loans were reallocated to the “good†side of the banks, resulting in a one-time increase in bank profits.
Wells and BofA’s results echoed Wednesday’s results from JPMorgan Chase, which also saw profits rise sharply in the last quarter as more loans were released from its distressed loan portfolio.
Wells, the nation’s largest mortgage lender, said its net interest income was “stabilized”, believing it to be 5% lower than the same period last year.
The bank released $ 1.7 billion from its loan loss reserves, money set aside to cover bad debts. Wells had set aside $ 8.4 billion to cover potentially bad loans in the second quarter of last year at the height of the pandemic, when millions of Americans lost their jobs and the economy shrank. effectively collapsed.
However, there isn’t an endless supply of bad debt that banks can tap into to boost their profits, and at some point investors will want to see these banks make profits from growing their business or billing. higher loans. Interest income from Wells and BofA fell from a year ago, due to the Federal Reserve keeping interest rates at ultra-low levels.
Morgan Stanley’s strong performance – which has very little consumer banking business – was driven by the abundance of mergers and state-owned companies this year. Morgan Stanley’s investment banking fees jumped 67% from a year ago and advisory fees tripled.
Financial conglomerate Citigroup – which has both a large consumer banking franchise, especially in credit cards, but also a large investment banking franchise – has benefited from both trends. Its profits jumped 48% from the previous year.
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