Sat, Apr 15, 2017 - Page 10 News List

US banks post solid earnings, hopeful on Trump’s agenda


Strong trading results, rather than lending, was the driving force behind solid earnings reported by large US banks on Thursday, as executives expressed measured optimism about the prospects for US President Donald Trump’s pro-growth agenda.

JPMorgan Chase & Co and Citigroup Inc reported big jumps in first-quarter net income compared with the same period last year, while Wells Fargo & Co continued to feel the effects of a fake accounts scandal and reported flat profits, missing analysts’ forecasts, but in a sign of sluggishness at all three banks, loan growth was weak, especially in some key areas such as corporate loans, which can serve as a proxy on broader economic activity.

“The economy is still what the economy was, it’s a slow-growth economy” Citigroup chief financial officer John Gerspach said on a conference call with reporters. “It’s not a robust economy yet, [but] I do believe that there is optimism that it will continue to grow and get better.”

Gerspach said Trump’s election, as well as the expectations of tax cuts and other measures had boosted optimism for stronger growth, but “we haven’t seen concrete changes yet in policies.”

Banking shares had rallied strongly on Trump’s election amid expectation that he would ease regulations and promote other growth measures, but the sector has cooled considerably.

JPMorgan chief executive Jamie Dimon described US consumers and businesses as “healthy overall,” but said growth could accelerate sharply if overly-constraining regulations were eased.

Dimon declined to estimate the chances Trump would be able to enact such changes.

“I don’t want to put odds on it, but I think you have a lot of people working on it to get it done,” he told reporters.

JPMorgan said results were boosted by big jumps in trading of bonds and other financial products, as well as the benefit of higher interest rates.

Net income rose 16.8 percent to US$6.5 billion.

Citigroup also highlighted strong trading results, especially in interest rate-related products.

Net income rose 16.8 percent to US$4.1 billion.

Both banks also benefited from lower reserves compared with the first quarter last year, when they set aside hundreds of millions of dollars to protect against the possibility of energy defaults due to the oil industry slump.

Wells Fargo also benefited from improvements in the energy sector, which permitted it to release US$200 million in reserves.

However, the bank’s expenses for salaries and other non-interest costs rose by nearly four times that amount due to higher legal costs and greater spending on compliance programs.

Earnings were US$5.5 billion, the same as the previous year.

The bank experienced a 35 percent drop in the opening of new checking accounts and a 42 percent tumble in credit-card applications.

“Right now, the most important job of this company is rebuilding trust,” Sloan said on a conference call with analysts.

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