New York (AP) — Four major US banks said profits increased by double digits in the previous quarter as banks’ bad debts and bad debt amortization declined as the US economy improved.
However, the performance of Citigroup, Bank of America, Wells Fargo and Morgan Stanley has benefited from a temporary increase in profits, and low interest rates remain a major headwind for Wall Street financial giants.
According to Bank of America, net income was up 58% to $ 7.26 billion, or 85 cents per share. According to FactSet, this exceeded Wall Street analysts’ estimates of 70 cents per share. Wells Fargo, on the other hand, recorded a 59% year-on-year increase in profits.
Both banks benefited from the ability to revoke some of the funds secured early in the pandemic in the event of a loan default. These billions of dollars of potentially problematic loans have been returned to the “good” side of the bank’s books, resulting in a temporary rise in bank profits.
Wells and BofA results were similar to JP Morgan Chase’s Wednesday results. JPMorgan Chase released more loans from its problematic loan portfolio, resulting in a surge in profits last quarter.
Wells, the country’s largest mortgage lender, said net interest income was “stable” and thought it was down 5% from the same period last year.
The bank freed $ 1.7 billion from the allowance for doubtful accounts and secured funds to cover bad debts. Wells secured $ 8.4 billion in the second quarter of last year to cover potentially bad debts during the peak of a pandemic when millions of Americans lost their jobs and the economy virtually collapsed.
There is no endless supply of non-performing loans available to banks to increase profits, but at some point investors want these banks to profit from business growth or additional loan claims. .. Interest income from both Wells and BofA has fallen from a year ago as the Federal Reserve keeps interest rates at very low levels.
The strong performance of Morgan Stanley, a very small retail banking business, was driven by the merger and corporate success unveiled this year. Morgan Stanley’s investment banking fees increased 67% year-on-year and advice fees tripled.
Citigroup, a financial conglomerate, not only has a large retail banking franchise, especially with credit cards, but also a large investment banking franchise, which has benefited from both trends. Its profits surged 48% year-on-year.
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Bank profits surged and bad debts fell, helped by merger enthusiasm | WGN Radio 720
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