US Banks Release Glowing 3Q Earnings as Sector Moves on From Pandemic

The offices of Investment banking company J.P. Morgan in London, England on Sept. 02, 2020. Daniel Leal-Olivas/AFP via Getty Images

From JPMorgan Chase to Citigroup, some of America’s largest banks released their quarterly earnings results this week, and the numbers suggest that these financial institutions are leaving behind the coronavirus pandemic. Bank stocks could extend their rally now that the latest figures show that businesses and individuals are borrowing again.

Bank of America

Bank of America topped estimates in its third-quarter earnings results, confirming better-than-expected loan losses and record advisory and asset management fees.

Profit at the second-largest bank in the United States rose 58 percent to $7.7 billion, buoyed by revenue of $22.87 billion, a 12 percent surge. As a result, earnings came in at 85 cents a share, exceeding analysts’ projections of 71 cents.

Net interest income rose 10 percent to $11.1 billion, beating forecasts of $10.6 billion. Loan balance growth, which allows banks to generate greater interest income, picked up an annualized 9 percent gain from the April–June period.

A man at a Bank of America ATM branch in New York City, on Oct. 6, 2008. Mario Tama/Getty Images

Investment banking fees jumped 23 percent to $2.2 billion, while asset management charges totaled $3.2 billion.

“We reported strong results as the economy continued to improve and our businesses regained the organic customer growth momentum we saw before the pandemic,” CEO Brian Moynihan said in a statement. “Deposit growth was strong and loan balances increased for the second consecutive quarter, leading to an improvement in net interest income even as interest rates remained low.”

US Bancorp

U.S. Bancorp recorded a $2.03 billion profit in the third quarter, up 28 percent from a year ago, the bank said on Oct. 14.

Earnings were $1.30 per share, an increase from 99 cents in the year-earlier period and topping analysts’ expectations of $1.15 per share.

The Minneapolis-based bank holding company reported that net revenue fell 1.2 percent to $5.89 billion, driven by declines in non-interest fees and interest income as commercial borrowers reduced or eliminated their loans. Industry observers had expected $5.76 billion.

Its net interest income, a closely watched gauge to highlight the difference between what it pays clients for deposits and what the bank charges them for loans, fell to 2.53 percent from 2.67 percent a year ago.

Executives believe that business and consumer banking activity will be revived as the economy recovers from the COVID-19 public health crisis and the government’s relief programs come to an end.

“On the consumer side of the equation, we’re seeing and we do expect credit card balances from here start to grow and possibly accelerate as we get into 2022,” Terry Dolan, U.S. Bancorp’s chief financial officer, said in a conference call with analysts.

As part of its broader economic outlook, the financial institution believes that additional government stimulus, falling new infections, and vaccine availability will support the economic recovery. But it’s concerned about surging inflation, fiscal policy uncertainty, and the possibility of new variants.

The quarterly update didn’t reference the $8 billion agreement to purchase MUFG Union Bank. The deal is anticipated to close in 2022.

Citigroup

Citigroup posted a stronger-than-expected quarterly earnings report on Oct. 14, with profit soaring amid an increase in trading revenue.

According to the results, net income soared 48 percent year-over-year, totaling $4.6 billion. In addition, Citigroup confirmed $2.15 in per-share earnings on $17.15 billion in revenue, which beat EPS estimates of $1.65 and $16.97 billion in revenue.

Trading revenue for fixed income totaled $3.18 billion, and equity markets came in at $1.23 billion. Analysts had forecasted $3.07 billion and $909.7 million, respectively.

“The recovery from the pandemic continues to drive corporate and consumer confidence and is creating very active client engagement as you can see through our strong results in Investment Banking and Equity Markets, both up approximately 40 [percent] year-over-year, in addition to double-digit fee growth in Treasury and Trade Solutions as we help our clients reposition their supply chain,” Chief Executive Officer Jane Fraser in a statement.

Like other banks, Citigroup released $1.16 billion in loan loss provisions that led to a net benefit of $192 billion. Citigroup accrued reserves during the financial crisis last year, setting aside billions of dollars for potential defaults because of the pandemic. Now that the economy is in recovery mode, and the wave of credit losses didn’t transpire, the bank has been folding the funds back into the company.

JPMorgan Chase

JPMorgan Chase & Co, the largest bank in the United States, might be waving goodbye to the pandemic after beating analysts’ forecasts.

JPMorgan Chase reported its third-quarter numbers on Oct. 13, posting a profit of $11.7 billion ($3.74 per share), compared to $9.4 billion ($2.92 per share) a year ago. Revenue increased 2 percent to $30.4 billion in the three months ending Sept. 30, topping estimates of $29.8 billion.

Lending income rose 2.5 percent, lifted by the company’s average loans, deposits, and credit card spending.

It also recorded a 50 percent jump in investment banking fees to a record of $3.28 billion, beating the consensus estimate by roughly $500 million.

The company’s Corporate & Investment Bank division experienced advisory fees almost tripling amid renewed activity in mergers and acquisition and equity underwriting. This allowed JPMorgan to remain as the second-largest provider of international M&A advisory, just behind Goldman Sachs.

“We don’t know the future any better than you do,” JPMorgan CEO Jamie Dimon stated on a conference call with reporters. “What we really want is good growth right now. These are great numbers. By the end of 2022, people are forecasting 4 [percent] unemployment, wages are going up, jobs are plentiful. Getting out of COVID, we should all be thanking our lucky stars.”

JPMorgan also released $2.1 billion from credit reserves to enhance its profit levels.

A Measure of U.S. Economic Recovery

This week’s flurry of bank earnings was a highly anticipated market event among investors. Many viewed the banks’ reports as a possible measurement for the post-pandemic economic recovery. Be it growth in lending or a reduction in downturn-related credit reserves, traders viewed the results as a symbol of how well the national economy and financial markets are performing heading into next year.

The stock market was pleased by the growth as the leading benchmark indexes rose on Oct. 14.