A year ago, US banks set aside billions of dollars for feared loan defaults in the corona pandemic. Now the economy is growing again.
The recovery of the US economy from the corona crisis is driving large US banks to jump in profits.
Bank of America and Wells Fargo, among others, benefited in the third quarter from the reversal of provisions that they had set up in the 2020 pandemic for possible loan defaults. Because as the economy picks up, it is foreseeable that not as many loans will default as had been feared in the meantime.
The money houses Morgan Stanley and Citigroup also increased their profits significantly. The day before, the largest US bank, JPMorgan, also reported a jump in profits.
Bank of America released provisions for loan losses in the amount of 624 million US dollars (539 million euros) in the summer, as it announced in Charlotte. A year earlier, she had put $ 1.4 billion into loan loss provisions. Because revenue was now gushing more strongly, the surplus jumped 58 percent to $ 7.7 billion.
The income – that is, the total income of the bank – increased by 12 percent to $ 22.8 billion. This was not least due to the investment banking: Here fee income rose by 23 percent to 2.2 billion dollars and thus almost reached a record level.
Morgan Stanley also benefited from investment banking and asset management from July to September. The profit rose year-on-year by a good 36 percent to 3.7 billion dollars. Income increased by a quarter to a good 14.7 billion dollars. The financial group recently played the boom in IPOs, mergers and acquisitions, on which banks earn well through fees. In investment banking alone, revenues shot up by a good two-thirds to $ 2.85 billion.
Citigroup increased its profits by almost half to $ 4.6 billion. The total income remained with 17.2 billion dollars practically at the previous year’s level, such as Citigroup announced in New York. However, revenues from trading in fixed-income securities and shares increased. Citigroup was also able to release provisions for impending loan defaults, which drove up profits.
In the case of competitor Wells Fargo, the dissolution of risk provisioning was even the main reason for the jump in profits. Because the bank’s earnings fell by 2.5 percent year-on-year to $ 18.8 billion. However, the institute released provisions for impaired loans in the amount of $ 1.4 billion. A year earlier, Wells Fargo had set aside nearly $ 770 million for loan defaults. Now the institute’s profit jumped 59 percent year-on-year to $ 5.1 billion.
Meanwhile, Wells Fargo’s scandal over fictitious account openings was once again negative – this time for $ 250 million. In 2016, the money house admitted that for years employees had opened bank and credit card accounts on a large scale that were not authorized by customers. The affair has already cost the bank more than $ 5 billion.
Already on Wednesday the largest US bank JPMorgan Chase had reported a profit jump of almost a quarter to 11.7 billion dollars.
Jane Stock is a technology author, who has written for 24 Hours World. She writes about the latest in technology news and trends, and is always on the lookout for new and innovative ways to improve his audience’s experience.
