JPMorgan Chase and Goldman Sachs Beat Analysts Expectations

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Big banks are making huge profits as customers weather the pandemic and deal makers take over busy markets.

JPMorgan Chase and Goldman Sachs, the nation’s largest banks by assets, beat analysts’ earnings expectations on Tuesday. JP Morgan reported In the second quarter, it increased to $11.9 billion from $4.7 billion a year earlier. Earnings per share of $3.78 and revenue of $30.5 billion beat analysts’ expectations. And Goldman’s profit was $2 billion more than anticipated.

“The epidemic is hopefully in some sort of hindsight,” Jamie Dimon, JPMorgan’s CEO, told analysts on a conference call. Mr. Dimon said consumers are “looking to go” supported by rising incomes, savings and home prices, and businesses are doing well.

The bank said consumers are starting to spend more on travel and entertainment, and are also buying homes and cars more quickly. Investment banking fees were the highest ever, supported by a hot market for mergers and acquisitions.

The company’s confidence in the recovery is reflected in the release of $3 billion in rainy day funding for the anticipated attack of credit defaults that will never occur, thanks to strong government incentive efforts that have helped keep many Americans afloat. In a statement, Dimon said the debt the bank had given up on trying to recoup fell 53 percent, “reflecting the increasingly healthy state of our customers and clients.”

Goldman Sachs earned approximately $5.5 billion on revenue of approximately $15.4 billion. Analysts had expected profits of just $3.4 billion. On a per-share basis, Goldman’s $15.02 showing was much higher than Wall Street’s estimate of $9.88.

The bank’s earnings also jumped compared to Goldman’s last year. to pay billions He was fined for a foreign bribery scandal linked to the 1Malaysia Development Berhad fund known as 1MDB.

But compared to the first three months of 2021, the bank’s earnings were lower – an indication that Wall Street firms may be nearing the end of the frenetic and profitable trading era that began as the pandemic threw the financial system into turmoil.

Goldman’s trading revenue for the quarter was lower than earlier this year and the same quarter last year. Its trade in fixed income, commodities and other financial products generated revenue of $4.9 billion for the quarter, compared to approximately $7.6 billion earlier this year and $7.2 billion for the same period a year ago. Analysts had estimated that the bank would generate just over $5 billion in revenue from such transactions. At JPMorgan, revenue from the markets division fell 30 percent from a record in 2020.

Despite the more rosy-than-anticipated reports, investors remain concerned that the economic recovery is losing momentum. Shares of JPMorgan and Goldman fell after the results were announced Tuesday morning, before closing the trading day down nearly 1 percent. A broader bank stock index fell almost 5 percent last month.

Consumer activity increased, but the results of banks showed only modest growth in borrowing, allowing them to earn more from their interest payments.

“Investors need more evidence of a potential improvement in loan demand to boost confidence,” said Alison Williams, an analyst at Bloomberg Intelligence. Analysts also asked executives about their outlook for the future. increased prices and the Federal Reserve’s monetary policy, which affects how much banks can charge in interest. An important measure of inflation jumped sharply in June; This increase is certain to keep concerns about rising prices front and center in the White House and the Fed.

Jeremy Barnum, CFO of JPMorgan, said that for now, expectations of economic recovery outweigh concerns about inflation.

“We are optimistic about the economy,” Mr. Barnum said. “We believe this comes with higher inflation and therefore higher rates” and this will allow banks to earn more from loans.

Bank of America, Citigroup and Wells Fargo will report earnings on Wednesday. Leaders of US banking giants have become increasingly optimistic this year as a rapid vaccine rollout is helping Americans come out of the stupor of the coronavirus pandemic.

“Obviously, if there is some kind of disruption or economic slowdown in the future, that will erode confidence,” Goldman Sachs CEO David M. Solomon told analysts on a conference call. “But it feels pretty constructive right now.”

Emily Flitter contributing reporting.

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