Banks in the United States have reported significant profit increases as the economy improves.
A growing US economy has reduced the need to set aside capital for loan defaults, according to a trio of prominent US banks that announced significantly higher earnings on Thursday.
The release of $1.1 billion in reserves boosted Bank of America’s results, while Citi’s received a $1.2 billion boost. A $1.7 billion drop in provisions improved Wells Fargo’s quarter.
“We delivered good earnings as the economy improved and our businesses recaptured the organic customer growth pace we witnessed before the epidemic,” stated Bryan Moynihan, CEO of Bank of America.
Fears that lockdowns to address Covid-19 may lead to a global depression prompted large institutions to lay aside billions of dollars in early 2020.
However, the findings are the latest evidence that consumers are in relatively good shape, thanks in part to Washington’s robust fiscal stimulus programs and accommodative monetary policy, which has bolstered the housing and equity markets.
The “low” number of charge-offs, a figure that creditors believe will not be paid, was highlighted by Wells Fargo Chief Executive Charlie Scharf.
Many economists feel the US is well positioned for growth, but they warn that rising inflation might dampen activity and force the Federal Reserve to raise interest rates sooner than expected.
JPMorgan Chase CEO Jamie Dimon said on Wednesday that investors should not focus “too much” on inflation and supply chain issues, citing the IMF’s solid prediction for ongoing growth in 2021 and 2022.
“You may have good growth while yet having some inflation,” Dimon explained. “It’s all right.” On Thursday, Citi Chief Financial Officer Mark Mason took a similar stance, calling strong economic growth “the good news.”
In response to a query concerning supply chain issues, Mason replied, “There are a number of those moving components out there.” “They start to normalize with time… and we’re hopeful that they will.” On a 1% reduction in revenue to $17.2 billion, Citi posted profits of $4.6 billion, up 48 percent over the previous year.
Bank of America reported a 58 percent increase in earnings to $7.7 billion on $22.8 billion in revenue.
Wells Fargo reported profits of $5.1 billion, up 59 percent on revenues of $18.8 billion, down 2.5 percent.
Citi shares increased 0.2 percent to $70.37 in morning trading, while Bank of America rose 2.5 percent to $44.24. The stock of Wells Fargo fell 0.2 percent to $45.96.