US banks re­port solid earn­ings as JPMor­gan CEO blasts Wash­ing­ton

Kuwait Times - - BUSINESS -

NEW YORK: Credit cards were a strength and trad­ing rev­enues a weak­ness in the solid US bank earn­ings re­leased Fri­day, as JPMor­gan Chase chief ex­ec­u­tive Jamie Di­mon erupted in frus­tra­tion at po­lit­i­cal grid­lock in Wash­ing­ton. JPMor­gan Chase, Wells Fargo and Cit­i­group all re­ported bet­terthan-ex­pected earn­ings, and bank ex­ec­u­tives de­scribed US eco­nomic growth as solid, if un­spec­tac­u­lar, as moves by the US Fed­eral Re­serve to lift in­ter­est rates have en­abled banks to charge more for loans.

Yet Fri­day’s del­uge of re­sults, the un­of­fi­cial start of the sec­ond-quar­ter cor­po­rate earn­ings pe­riod, drew a lack­lus­ter re­ac­tion from Wall Street, with shares of all three banks fall­ing af­ter the re­ports. At JPMor­gan, the big­gest US bank by as­sets, sec­ond-quar­ter net in­come rose 13.4 per­cent to $7.0 bil­lion. Net rev­enues climbed 4.7 per­cent to $26.4 bil­lion. Key fac­tors be­hind the earn­ings jump in­cluded higher net in­ter­est in­come due to the ris­ing in­ter­est rate environment, as well as higher over­all loans, of­ten seen as a proxy of eco­nomic ac­tiv­ity of firms and house­holds.

But JPMor­gan’s trad­ing di­vi­sions suf­fered com­pared with the year-ago pe­riod, with the bank cit­ing “sus­tained low volatil­ity.” An­a­lysts also were dis­ap­pointed by a $500 mil­lion cut to JPMor­gan’s 2017 pro­jec­tion for growth of net in­ter­est in­come to $4 bil­lion, im­ply­ing it sees weaker loan growth in the sec­ond half of 2017, due in part to the Fed’s pol­icy of only rais­ing in­ter­est rates grad­u­ally. “We’re look­ing at a slower rise in in­ter­est rates in gen­eral and that speaks to Fed funds rate pol­icy,” said CFRA an­a­lyst Ken Leon. “I be­lieve you’re not go­ing to see sig­nif­i­cant con­tri­bu­tions of net in­ter­est in­come from ris­ing rates un­til 2018 and 2019.”

Di­mon blasts Wash­ing­ton

JPMor­gan chief ex­ec­u­tive Jamie Di­mon also made waves with a col­or­ful tirade against Wash­ing­ton grid­lock that he blames for block­ing progress on tax re­form and other growth mea­sures needed to boost the econ­omy. Di­mon, who is a mem­ber of Pres­i­dent Don­ald Trump’s busi­ness ad­vi­sory coun­cil, warned the US will have trou­ble ac­cel­er­at­ing growth from its cur­rent 1.5 to 2.0 per­cent trend if it fails to come to­gether in fa­vor of pro-busi­ness poli­cies.

“It’s al­most an em­bar­rass­ment to be an Amer­i­can ci­ti­zen trav­el­ing around the world and lis­ten­ing to the stupid shit we have to deal with in this coun­try,” Di­mon told an­a­lysts on a con­fer­ence call, “It’s not a Repub­li­can is­sue, it’s not a Demo­cratic is­sue and it doesn’t mat­ter who the pi­lot is.” Di­mon’s re­marks come amid lag­ging progress on Pres­i­dent Don­ald Trump’s eco­nomic agenda, with the out­look highly un­cer­tain for a Repub­li­can health care law that has been seen as im­por­tant to tax re­form.

Cit­i­group chief fi­nan­cial of­fi­cer John Gerspach ex­pressed cau­tious op­ti­mism about the out­look for pro-growth mea­sures from Wash­ing­ton. “The hope is still there,” Gerspach said in a con­fer­ence call with re­porters. “Ob­vi­ously it’s taken a lit­tle bit longer than any­body would want.” Cit­i­group’s net in­come came in at $3.9 bil­lion, down 3.2 per­cent from the year-ago pe­riod, but bet­ter than an­a­lysts ex­pected. Rev­enues rose two per­cent to $17.9 bil­lion, with rev­enues from Citi-branded credit cards jump­ing 10 per­cent fol­low­ing a ven­ture with Costco Whole­sale.

Cit­i­group cited higher cost of credit and op­er­at­ing ex­penses as fac­tors be­hind the drop in profit. It also said its trad­ing rev­enues were dented by an un­fa­vor­able com­par­i­son with the year­ago pe­riod, when Brexit-re­lated trad­ing boosted vol­umes. Wells Fargo’s net in­come rose 4.5 per­cent from the year­ago pe­riod to $5.8 bil­lion. Rev­enues of $22.2 bil­lion were essen­tially flat com­pared with the year-ago pe­riod. Net in­ter­est in­come rose, but over­all loans were essen­tially un­changed com­pared with the year-ago pe­riod. One fac­tor was a de­cline in auto loans due to tighter un­der­writ­ing stan­dards.—AFP

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