The biggest commercial banking firms in the States have bucked industry watchers’ estimates by posting exceptional profits for the second quarter of the year.
Bank of America Corp., Citigroup Inc., JP Morgan Chase & Co., and Wells Fargo & Co. posted a combined $33 billion in total profits even as the US economy started coming alive after a difficult pandemic-ridden year.
The posted profits are exponentially higher than the measly $6 billion posted this time last year and have significantly gone above the expected $24 billion.
Profits were lifted by the release of $9 billion, which the four biggest consumer banking firms set aside to absorb potential losses caused by the pandemic. Fortunately, stimulus packages and loan repayment holidays mandated by the government have stemmed most pandemic losses and enabled companies to remain profitable.
Other factors considered
Another reason why banking profits are up is how consumer spending has risen over the past sixteen months, surprising many analysts as the numbers are well above those from before the pandemic.
The nationwide vaccination program is seen as one contributing factor to this trend. As a result, many Americans are making their way back to work or getting new jobs, putting more money in their pockets, and enabling them to spend and support the economy.
An uptick in the capital markets is another driving factor. The Goldman Sachs Group, in particular, posted a profit of around $5.35 billion – over twice the value of its adjusted earnings at the end of Q2-2020.
Citigroup CEO Jane Fraser is particularly confident that business performance will continue to improve as many countries consider reopening strategies. Indeed, Fraser opines that global recovery efforts go beyond what was previously expected, and corporate confidence is bound to rise over the coming months.
Consumer lending is also up, as seen in the 22% increase in credit and debit card usage among JP Morgan customers and the 40% increase in spending activity for Citi-branded credit cards. However, Citigroup also noted a 4% decrease in card loans, given how many customers are still paying off balances from the previous year.
Citigroup executives have expressed hope that their customers will return to how they used to carry revolving balances later this year as the government’s stimulus programs draw to a close.
For its part, Wells Fargo’s credit card-driven revenue is up by 14%, while Bank of America’s loan balances grew by $5.1 billion.