The four largest US consumer banks had a strong third half of the year. The rebound in the country’s economy allowed them to free up more cash than they had set aside for losses from the Covid-19 pandemic.
JPMorgan Chase, Citigroup, Well Fargo and Bank Of America Corp, considered by analysts and economists to be the barometers of the broader economy, reported third-quarter profits of $28.7 billion, exceeding analysts’ estimates.
Much of this profit was driven by the release of $6 billion in funds that banks had set aside for pandemic loan losses, which ultimately did not materialise, thanks in part to a government stimulus package of grants, furloughs and loan repayments.
With the nationwide rollout of vaccinations allowing Americans to get back to work and social activities after 19 months of business closures and restrictions, household consumption spending has surged, banks said.
Loan growth, a key measure closely watched by analysts, was mixed on Wall Street, however. Some lenders are still struggling to increase their loan portfolios as consumers and businesses, fuelled by funds from government assistance programmes, continue to pay back their loans.
However, executives at the major banks are, on balance, optimistic but cautious that the economy is on a healthy trajectory. Risks have not disappeared and concerns about inflation and the latest round of Covid-19 infections remain important.
“The outlook for the economy is promising,” Well Fargo managing director Charles Scharf told analysts on Thursday. “Consumer finances remain strong, with debt at a 45-year low, and a debt burden below its long-term average. Businesses are also strong” .
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