BoA reports profit; Citi, Wells Fargo beat expectations
Americans are ramping up spending. That's good for big banks' bottom lines.
Bank of America said that its profit rose to $9.2 billion in the second quarter - more than double its earnings of $3.5 billion a year earlier, thanks in part to releasing some of the money it had set aside last year.
Two other major lenders, Citigroup and Wells Fargo, reported profit and revenue that beat analysts' expectations.
"Our customers are seeing good growth opportunities in a recovering economy," Brian Moynihan, Bank of America's chief executive, told analysts on a conference call. "The important thing is we're seeing increased activity," he said, citing consumer spending and rising deposits since the first quarter, when the country was still emerging from a worrisome winter and vaccination programs were just ramping up.
The company's losses from consumers not paying back their debts fell to the lowest rates in 25 years, while balances on loans grew for the first time since the beginning of last year, according to the bank's chief financial officer,
Paul Donofrio. It also released $2.2 billion from a rainy-day fund that it had set aside for a predicted wave of defaults that never emerged, thanks to robust government stimulus efforts that helped keep many Americans afloat.
Still, the results weren't entirely rosy: Revenue was $21.5 billion, down 4 percent from the same period a year ago and short of analysts' expectations. In its consumer business, Bank of America's average total outstanding loans were off 12 percent, to $282 billion, from last year - taking some shine off the increase in profits.
Bank of America's stock price fell as investors looked past the immediate results, weighing whether the company could boost the number of loans on its books and earn more from charging interest on those loans. Shares ended the day of trading down nearly 3 percent.
Even with robust earnings reports - JPMorgan Chase and Goldman Sachs reported solid quarters investors are questioning whether the economic rebound that has buoyed the banking giants is starting to lose its momentum.
Executives' optimistic comments this week haven't allayed those concerns, sending bank stocks generally lower. Citi initially rose after it reported results, but had given back those gains by the end of trading - even with a better report than Wall Street had expected.
Wells Fargo's shares rose 4 percent, although that may have been more a reflection of the bank's regulatory future as much as its economic fortunes. During a call with executives, analysts repeatedly raised the prospect of the Federal Reserve's removing the asset cap put in place after a series of problems at the bank, including a fakeaccount scandal that badly bruised its reputation.
Citi reported a profit of $6.2 billion on revenue of $17.5 billion; analysts had expected slightly lower revenue of $17.2 billion, and Citi's per-share earnings of $2.85 exceeded analysts' expectations by 89 cents. Wells Fargo beat expectations with earnings per share of $1.38 - a vast improvement over its loss of $1.01 per share a year earlier - while revenue increased to $20.3 billion, up 11 percent from 2020.
Like Bank of America, Citi and Wells Fargo released some of the money they had set aside to brace themselves for loan losses as a result of the pandemic.