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Citigroup profits jumped more than five fold from a year earlier, helped by an improving economy that resulted in fewer bad loans on the bank’s balance sheetBy KEN SWEET AP Business WriterJuly 14, 2021, 1:52 PM• 2 min readShare to FacebookShare to TwitterEmail this articleNEW YORK — Citigroup profits jumped more than five fold from a year earlier, helped by an improving economy that resulted in fewer bad loans on the bank’s balance sheet.Citi is the latest big bank to see profits soar this quarter, along with JPMorgan Chase, Bank of America and Goldman Sachs. All of them got a one-time boost to their bottom lines because they were able to reverse some of the billions of dollars set aside last year to guard against customer defaults.The New York-based bank said it earned $6.19 billion, or $2.85 a share. That’s up from a profit of $1.06 billion, or 38 cents a share, in the same period a year earlier. The results were significantly better than the $1.97-per-share profit that analysts had expected, according to FactSet.Like other big banks, Citi was able to move previously bad loans onto the “good” side of its balance sheet as the economy had improved since vaccinations have become more widespread. Citi was able to to release $2.4 billion from its loan-loss reserves, compared to the $5.94 billion it had to put into those reserves a year earlier.The pace of the global recovery is exceeding earlier expectations and with it, consumer and corporate confidence is rising. While we have to be mindful of the unevenness in the recovery globally, we are optimistic about the momentum ahead,” said Jane Fraser, Citigroup’s CEO, in a statement.The improving balance sheet can be seen in Citi’s consumer banking franchise. The division reported a $1.8 billion profit in the quarter, compared to the loss it reported a year earlier. Last year’s loss was entirely tied to Citi putting away funds to cover potentially bad loans.Citi’s trading revenue declined in the quarter, ä reflection of how markets have calmed in the past year. The second quarter of 2020 was a period of high volatility as investors navigated the social and economic impacts of the coronavirus pandemic, which provided opportunities for traders to profit.Total revenues in Citi’s institutional clients group, which includes its trading desks, was $10.39 billion in the quarter, down 14% from a year earlier. Total revenue across the entire firm was $17.5 billion.
Bank of America’s second quarter profit more than doubled from a year earlier, as the consumer banking giant was able to move more loans onto the “good” side of its balance sheet as the pandemic wanesBy KEN SWEET AP Business WriterJuly 14, 2021, 11:51 AM• 2 min readShare to FacebookShare to TwitterEmail this articleNEW YORK — Bank of America’s second quarter profit more than doubled from a year earlier, as the consumer banking giant was able to move more loans onto the “good” side of its balance sheet as the pandemic wanes.BofA is the latest of the big Wall Street banks to report stronger profits this quarter, largely due to the improving economy and fewer borrowers being delinquent on their loans. But like other banks, BofA saw a decline in interest income and revenues from a year earlier because of lower interest rates.The Charlotte-based bank said it earned $9.22 billion in the last three months, or $1.03 per share. That is up from a profit of $3.53 billion, or 37 cents per share, from the same period a year earlier. The results were better than the 77-cent-per-share profit that analysts had forecasted, according to FactSet.Bank of America’s profits were boosted by two one-time items. The bank was able to release $1.6 billion from its loan-loss reserves that it had set aside during the pandemic to guard against defaults, and also recorded a $2 billion one-time credit related to certain taxable assets in the U.K.While Bank of America’s profits rose from a year earlier, revenues did not. Interest income fell in the quarter to $10.23 billion from $10.85 billion a year earlier, due to lower interest rates. Bank of America’s balance sheet is more heavily weighted toward securities with short-term durations, which means the bank’s interest income can fluctuate more when interest rates change compared to other banks.The bank also saw a decline in revenues from trading, similar to what happened at JPMorgan Chase and Goldman Sachs. The second quarter of 2020 was a highly volatile one as traders navigated the impact of the pandemic, which gave Wall Street traders ample opportunities to find investments to profit from in the volatility. Now that things have cooled down, those profits have declined.The bank’s global markets division, which contains its trading desks, reported a profit of $908 million in the quarter. That’s down from $1.9 billion a year earlier.
Goldman Sachs had the second-best quarterly profit in the firm’s history in the quarter ended in June, helped by a strong performance in its investment banking division that more than made up for a decline in trading revenuesBy KEN SWEET AP Business WriterJuly 13, 2021, 4:42 PM• 3 min readShare to FacebookShare to TwitterEmail this articleNEW YORK — Goldman Sachs had the second-best quarterly profit in the firm’s history in the quarter ended in June, helped by a strong performance in its investment banking division that more than made up for a decline in trading revenues.The New York-based bank said Tuesday that it earned $5.49 billion in the second quarter, or $15.02 a share, compared with a profit of $373 million, or 53 cents per share, in the same period a year ago. Last year’s results were impacted by legal expenses related to the Malaysia 1MDB scandal.The results beat the expectations of analysts, who were looking for Goldman to earn $10.30 a share last quarter, according to FactSet.Goldman has had several strong quarters during the pandemic, as the bank’s traders and investment bankers have found numerous opportunities to profit from volatility and rising stock prices. The profits in the second quarter were the second highest in the firm’s public history, trailing only the $6.71 billion Goldman made in the first quarter this year.The bank’s return on equity — a measurement of how well a bank profits from the assets it holds — was a hefty 23.7% in the quarter. A bank like Goldman aims to have its return on equity above 10%.This quarter’s performance was driven by the firm’s investment bank division, which reported a 36% rise in revenues from a year earlier, helped by higher financial advisory revenues and more stock underwriting revenues. Goldman has been one of the beneficiaries of the increase in the IPO market the past year, particularly the use of what are known as SPACs, or special purpose acquisition companies. These SPACs look for private companies to take public, and Goldman has both advised SPACs on acquisition targets and helped them raise money from investors.Goldman also had a hand in several large corporate deals this quarter, including the spin-off of WarnerMedia from AT&T.The firm’s trading desks had a more subdued quarter, although still strong by historic standards. Net revenues from trading were $4.90 billion, down 32% from a year earlier when heightened market volatility due to the pandemic gave traders ample opportunities to profit on market movement. Bond trading revenues fell 45% from a year earlier, also a reflection of how volatile the market was last year.Revenues at Goldman for the quarter rose to $15.39 billion from $13.3 billion the same period a year earlier.The bank announced it planned to raise its quarterly dividend to $2 a share starting in September, up from $1.25 a share.Goldman’s shares were down 1.6% around midday.
JPMorgan Chase says its second quarter profits more than doubled from a year ago — a reflection of the improving global economy and fewer bad loans on its balance sheetBy KEN SWEET AP Business WriterJuly 13, 2021, 3:31 PM• 3 min readShare to FacebookShare to TwitterEmail this articleNEW YORK — JPMorgan Chase said its second quarter profits more than doubled from a year ago — a reflection of the improving global economy and fewer bad loans on its balance sheet. But the bank’s revenues fell noticeably in the quarter, due partially to a decline in interest rates during the last three months.The nation’s biggest bank by assets said Tuesday that it earned $11.95 billion, or $3.78 per share, up from a profit of $4.69 billion, or $1.38 a share, in the same period a year ago. The results topped Wall Street’s forecast for earnings of $3.20 a share this quarter, according to FactSet.Expectations are high for the banks this earnings season. Banks set aside tens of billions of dollars to guard against customer defaults early in the pandemic; some of those billions are now being moved back onto the “good” side of their balance sheets. These so-called loan-loss reserve releases have boosted the banks’ bottom lines in the last two quarters.The improving balance sheets have allowed banks to increase their payouts to investors. JPMorgan raised its quarterly dividend to $1 per share late last month, and plans to buy back $30 billion in stock from investors this year.The New York-based bank released $2.29 billion from its loan-loss reserves this quarter, down from the $4.16 billion it released in the first quarter. Most of the release came from the bank’s consumer division, particularly credit cards.“Consumer and wholesale balance sheets remain exceptionally strong as the economic outlook continues to improve,” said JPMorgan Chairman and CEO Jamie Dimon, in a statement.While the bank’s balance sheet improved, revenues did not. Firmwide revenues at JPMorgan were $31.4 billion in the quarter, down 7% from a year earlier.Part of the reason for the revenue decline was interest rates. Bond yields have steadily fallen the last three months as inflation worries have dissipated. Those declines impact banks’ abilities to charge more for loans to borrowers. The bank said that while it had seen increased spending on its credit cards, consumers were aggressively paying down balances which also cut into interest income.JPMorgan’s investment bank was also a drag on the firm’s results, reporting a 19% decline in revenues and 9% decline in profits in the quarter compared to a year earlier. A significant part of that decline was a fall in trading revenue, particularly in the bond market, the bank said.Revenue across the bank was $31.4 billion in the quarter, down 7% from a year earlier.JPMorgan shares fell 1.2% in early trading.
Recently freed from regulators’ coronavirus restrictions, the largest U.S. banks have announced plans to return tens of billions of dollars to their shareholders over the next year in the form of dividends and stock buybacksBy KEN SWEET AP Business WriterJune 28, 2021, 10:21 PM• 3 min readShare to FacebookShare to TwitterEmail this articleNEW YORK — Recently freed from regulators’ coronavirus restrictions, the largest U.S. banks on Monday announced plans to return tens of billions of dollars to their shareholders over the next year in the form of dividends and stock buybacks.It’s a signal that banks are looking to reward their shareholders after last year’s pandemic-driven losses. But it’s also a sign banks at the moment see few places to put their big profits other than back into the hands of their shareholders.In an attempt to ensure banks could hold up in the face of a severe pandemic-induced recession, the Federal Reserve last year put into place restrictions on how much banks could pay in dividends or spend on stock buybacks. Banks at the time were reporting tens of billions in losses as businesses were shuttered and Americans were thrown out of work.But in last week’s “stress tests,” the Fed found that all of the nation’s big banks were healthy enough to withstand a sudden economic catastrophe and ended its restrictions on dividends and buybacks.Morgan Stanley on Monday said it would double its quarterly dividend, from 35 cents per share to 70 cents per share, with payouts expected to start in the third quarter. The bank will also buy back $12 billion worth of its outstanding shares over the next year. For context, analysts surveyed by FactSet expect Morgan Stanley to make about $15.5 billion in profits this year.Wells Fargo is also heavily upping its dividend, raising it from 10 cents per share to 20 cents a share. The bank plans to buy back $18 billion in stock over the next year, it said in a statement. That buyback plan would also consume all of Wells Fargo’s forecasted profits, with analysts expecting the bank to earn around $15.7 billion this year, according to FactSet.JPMorgan Chase said it planned to increase its quarterly dividend to $1 per share, up from 90 cents. The bank said it plans to continue its $30 billion stock buyback plan that was announced late last year. JPMorgan is expected to post earnings of about $40 billion this year.Other banks made similar announcements. Bank of America said it plans to raise its dividend by 17% to 21 cents per share, continuing its $25 billion stock buyback. Truist, the bank that was made when BB&T and SunTrust merged, said it planned to raise its dividend to 48 cents per share from 45 cents per share. Pennsylvania-based PNC, now one of the largest banks in the country after merging with BBVA, plans to up its dividend by 9% to $1.25 per share.
All 23 of the nation’s biggest banks are healthy enough to withstand a sudden economic catastrophe, the Federal Reserve said Thursday, releasing the results from its latest “stress tests.”By KEN SWEET AP Business WriterJune 24, 2021, 10:52 PM• 3 min readShare to FacebookShare to TwitterEmail this articleNEW YORK — All 23 of the nation’s biggest banks are healthy enough to withstand a sudden economic catastrophe, the Federal Reserve said Thursday as it released the results from its latest “stress tests,” giving the banks the green light to resume paying out dividends to investors and buying back stock.The Fed also said it would remove all of the coronavirus pandemic restrictions they put on the industry last year, following the results of the tests.The Dodd-Frank Act passed after the 2008 financial crisis requires the nation’s biggest, most complicated banks to undergo a set of tests to see how well their balance sheets would hold up against a severe economic meltdown like that seen in the Great Recession. The tests vary from year to year, but generally involve the Fed testing to see how much in losses the banking industry would take if unemployment were to skyrocket and economic activity were to severely contract.Due to the economic damage caused by the pandemic, the Fed did two stress tests of the banking system last year, trying to simulate the impact a long-lasting economic downturn and pandemic would have on the nation’s banking system. The Fed’s worst case scenario last year, a double-dip recession, would have caused roughly a quarter of all the biggest banks to breach their minimum capital requirements.As a safety measure during the pandemic, the Fed put in place restrictions on the banks to pay out dividends and buy back shares.This year’s harshest test, known as the “severely adverse scenario,” involved a hypothetical global recession lasting from late 2020 to September 2022, causing the U.S. economy to contract 4%. Unemployment would jump to 10.75%, and stock prices would fall 55%.Under these parameters, the nation’s 23 largest banks would collectively lose more than $470 billion. While the average tier-one capital ratio of these banks would fall to 10.6% from an average level of 13%, that would still be more than double what is required under the Dodd-Frank Act.“Over the past year, the Federal Reserve has run three stress tests with several different hypothetical recessions and all have confirmed that the banking system is strongly positioned to support the ongoing recovery,” said Vice Chair for Supervision Randal K. Quarles.Freed from the Fed’s restrictions, banks like JPMorgan Chase, Citigroup, Goldman Sachs and others are expected to announce plans to pay back investors in the coming days. Bank stocks have risen sharply this year as the U.S. economy has recovered from the pandemic and investors have increasingly bet on these large institutions hiking up their dividends or buying back more shares.The KBW Bank Index of the 24 largest banks is up 27.9% this year, more than double the gains for the S&P 500 index.
Congress has overturned a set of regulations enacted in the final days of the Trump administration that effectively allowed payday lenders to avoid state laws capping interest ratesBy KEN SWEET AP Business WriterJune 24, 2021, 9:45 PM• 3 min readShare to FacebookShare to TwitterEmail this articleNEW YORK — Congress on Thursday overturned a set of regulations enacted in the final days of the Trump administration that effectively allowed payday lenders to avoid state laws capping interest rates.The House voted 218-208 to overturn the Office of the Comptroller of the Currency’s payday lending regulations, with one Republican voting with Democrats.Thursday’s vote to overturn the OCC’s “true lender rules” marked the first time Democrats in Congress successfully overturned regulations using the Congressional Review Act.The act was enacted in the mid-1990s and gives Congress the authority to overrule federal agency rules and regulations with a simple majority vote in the House and Senate. Its powers are limited to a certain period after an agency finalizes its regulations, usually around 60 legislative days.The Senate voted 52-47 to overturn the OCC rules on May 11. The bill now goes to President Joe Biden, who is expected to sign it.By overturning the Trump administration rule enacted in late 2020, Democrats aimed to stem a payday lender practice that critics had dubbed a “rent-a-bank” scheme.While payday lenders are regulated at the state level, the payday lender would partner with a bank with a national banking charter when making high-cost installment loans. Because a national bank is not based in any one state, it is not subject to individual state usury laws.“State interest rate limits are the simplest way to stop predatory lending, and the OCC’s rules would have completely bypassed them,” said Lauren Saunders, associate director at the National Consumer Law Center, a consumer advocacy group.This isn’t the first time that “rent-a-bank” has been an issue. Federal regulators clamped down on the practice in the 1990s, but with the proliferation of online banking and fintech companies specializing in online-only financial services, the practice is growing once again.An example on how the practice works can be seen in Elevate, a Texas-based fintech company that offers high-cost installment loans like a payday loan. Elevate offers loans in several states, including Arizona, which has a state law capping interest rates on payday loans at 36%. Because Elevate uses banks out of Utah and Kentucky to originate those loans, Elevate is able to make loans in Arizona for as high as 149%. In other states, Elevate makes loans with annual interest rates as high as 299%.In a statement, Biden’s appointee to the Comptroller of the Currency said he would “respect” Congress overturning their regulations.“I want to reaffirm the agency’s long-standing position that predatory lending has no place in the federal banking system,” acting Comptroller of the Currency Michael J. Hsu said in a statement.While Thursday’s vote marked a first for Democrats, former President Donald Trump and a Republican-controlled Congress used the Congressional Review Act when they came to power in 2017, overturning 15 rules and regulations enacted in the waning days of the Obama administration.Before Trump, the law was used only once, in 2001, when Republicans in Congress voted to repeal a set of ergonomic regulations enacted in the final day of the Clinton administration.On Thursday, the House also used the act to overturn a set of regulations approved by the Equal Employment Opportunity Commission under Trump regarding employment discrimination issues. The vote was 219-210.On Friday, the House is expected to use it again to overturn Trump-era regulations that would have allowed oil and gas companies to produce more methane when they drill.Both the bills have passed in the Senate.