US banks report solid earnings in Q1

Lenders still hopeful on Trump agenda

NEW YORK, April 15, (AFP): Strong trading results, rather than lending, was the driving force behind solid earnings reported by large US banks, as executives expressed measured optimism about the prospects for President Donald Trump’s pro-growth agenda.

JPMorgan Chase and Citigroup reported big jumps in first-quarter net income compared with the same period of last year, while Wells Fargo continued to feel the effects of a fake accounts scandal and reported flat profits, missing analyst estimates.

But in a sign of sluggishness at all three banks, loan growth was weak, especially in some key areas such as corporate loans, which can serve as a proxy on broader economic activity.

“The economy is still what the economy was, it’s a slow-growth economy” Citigroup chief financial officer John Gerspach said on a conference call with reporters. “It’s not a robust economy yet.”

But he added, “I do believe that there is optimism that it will continue to grow and get better.”

Gerspach said Trump’s election and the expectations of tax cuts and other growth measures had boosted optimism for stronger growth, but “we haven’t seen concrete changes yet in policies.”

Shares of Citigroup dipped 0.1 percent to $58.47 in midday trading, while JPMorgan lost 0.3 percent to $85.12, and Wells Fargo tumbled 2.4 percent to $51.87.

Banking shares had rallied strongly on Trump’s election amid expectation of he would ease of regulations and promote other growth measures that would help their business.

But the sector has cooled considerably on Wall Street as Trump’s policies have yet to materialize. The S&P 500 financials index is down 0.3 percent so far in 2017.

JPMorgan chief executive Jamie Dimon described US consumers and businesses as “healthy overall,” but said growth could accelerate sharply if overly-constraining regulations were eased.

Dimon declined to estimate the chances Trump will be able to enact such changes.

“I don’t want to put odds on it, but I think you have a lot of people working on it to get it done,” he told reporters on a conference call.

JPMorgan said results were boosted by big jumps in trading of bonds and other financial products, as well as the benefit of higher interest rates. Net income rose 16.8 percent to $6.5 billion.

Citigroup also highlighted strong trading results, especially in interest rate-related products. Net income rose 16.8 percent to $4.1 billion.

Both banks also benefited from lower reserves compared with the January-March period last year, when they set aside hundreds of millions of dollars to protect against the possibility of energy defaults due to the oil industry slump.