BOA, City, and Others Simultaneously Report Surprise Earnings
Reflecting Increase in Corporate and Business Loans
Growing Expectations for Economic Activity Normalization
[Asia Economy New York=Special Correspondent Baek Jong-min] Major U.S. banks showed a significant increase in earnings. There is growing optimism that this reflects economic recovery following the COVID-19 pandemic, signaling a positive start to the third-quarter corporate earnings season.
On the 14th (local time), Bank of America (BOA), Citigroup, Wells Fargo, and Morgan Stanley all simultaneously announced surprising earnings results.
BOA's strong performance stood out in particular. As the second-largest bank in the U.S. by assets, BOA's third-quarter net income surged 58% year-over-year to $7.6999 billion. This was a 'surprise' that far exceeded market expectations. Revenue also rose 12% from the same period last year to $22.77 billion, surpassing expert forecasts.
Wells Fargo's net income also jumped 59% year-over-year, and Citigroup posted a 48% increase in earnings.
Investment bank Morgan Stanley's net income and revenue rose 36% and 26%, respectively. JPMorgan, the largest U.S. bank, which announced earnings a day earlier, also saw net income increase by 24%, highlighting a broad rise in bank earnings.
The Wall Street Journal (WSJ) reported that although bank loan volumes have yet to reach pre-COVID-19 levels, loans are increasing as corporate and consumer economic activities normalize, contributing to strong bank earnings. The rise in bank lending has emerged as an indicator of economic recovery. BOA explained, "Loan growth is expected across all products."
It is also noted that a significant portion of the large loan loss reserves banks set aside last year in anticipation of bad debts due to the COVID-19 crisis was reversed back into profits, contributing to the earnings.
The merger and acquisition boom is increasing revenue in the investment banking sector. Advisory fees for mergers and acquisitions at Morgan Stanley and Citigroup tripled, while JPMorgan's doubled.
The strong bank earnings boosted expectations not only for bank stocks but also for overall corporate earnings, driving stock market gains. On that day, the S&P 500 index rose 1.7%, marking its highest increase in seven months.
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