Amid the government’s spendings and stimulus, the banks also reported a strong surge in consumer spending. The credit card spending for most of the banks has shot above the pre-pandemic levels.
Amid strong earnings season this week, US banking giants are in top gear. The four-largest US consumer banks reported blockbuster results for the second quarter (Q2 2021).
Wells Fargo & Co (NYSE: WFC), JPMorgan Chase & Co (NYSE: JPM), Citigroup Inc (NYSE: C), and Bank of America Corp (NYSE: BAC) reported a combined $33 billion in net profits. Together, the banks had put $9 billion aside to absorb the losses fueled by the pandemic. Thus, the net combined profit comes to $24 billion which is still much higher than the analysts’ estimates.
- Banking giant JPMorgan reported a net profit of $11.9 billion against $4.7 billion last year.
- Citigroup’s profit for Q2 2021 surged to $6.19 billion from $1.06 billion last year.
- Wells Fargo reported a $6 billion profit in the second quarter against a $3.85 billion loss last year.
- Bank of America also clocked $8.96 billion in second-quarter profit from $3.28 billion.
The interesting thing is that consumer spending has surged further from the pre-pandemic. On the other hand, the bank noted that the credit quality has improved with savings and investments rising. The banks acknowledged the strong stimulus coming from the U.S. government. This has considerably helped to subside the feared pandemic losses.
Over and above, the national vaccination roll-out by the US government has helped more Americans join the workforce. Apart from these four big banks, banking giant Goldman Sachs reported a net profit of $5.35 billion. It is double its adjusted earnings a year back. Speaking to Reuters, Citigroup Chief Executive Officer Jane Fraser said:
“The pace of the global recovery is exceeding earlier expectations and with it, consumer and corporate confidence is rising”.
Banks Q2 2021 Earnings: Strong Pick Up in Consumer Lending
With the global recovery on track, there was a strong pick-up in consumer lending. Banking giant JPMorgan reported that the combined spending on debit and credit cards surged 22%. Also, the spending on the Citi-branded credit cards shot by a massive 40% from the last year.
For Citigroup, the card loans have dropped 4% with many customers paying off balances. Mark Mason, the chief financial officer of Citigroup said that customers might go back to their pre-pandemic habits of carrying revolving balances as of the government spending increases.
In comparison to last year, Wells Fargo also reported a 14% surge in credit-card revenue. This happened along with the surge in the point-of-sale volume. Wells Fargo chief financial officer Mike Santomassimo said:
“What we’re seeing is people starting to spend and act more in a way that seems more like it was before the pandemic started and, certainly on the consumer side, spending is up quite a bit, even when you compare it to 2018”.
The growth in loans remained tepid. However, there are clear signs of growing demand. The loan balances at Bank of America surged $5.1 billion from the last quarter. This is excluding the loans related to the US government’s pandemic aid program. “Deposit growth is strong, and loan levels have begun to grow,” said Bank of America CEO Brian Moynihan.
Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
