Banking giants off to a strong start on back of President Trump’s tax reforms

US BANK earnings have got off to a strong start, with JP Morgan reporting its highest quarterly profit on record and Citigroup posting its highest since 2015 on the back of rising interest rates and Donald Trump’s tax reforms.

JP Morgan recorded $8.71bn (£6.1bn) in profits in the first quarter, up 35 per cent from $6.45bn (£4.5bn) during the same period last year.

It benefited in part from a rise in interest rates by the US Federal Reserve, which has allowed banks to charge more for customers to borrow.

Net interest income at JP Morgan was $13.3bn, up 10 per cent from a year earlier.

Banking peer Citigroup also benefited from tighter monetary policy, with first quarter profits rising by 13 per cent to $4.62bn (£3.2bn) versus $4.09bn (£2.86bn) in the first three months of 2017.

It marks the largest quarterly profit for Citi since 2015.

While revenue growth was modest across Citigroup as a whole – up from $18.37bn to $18.87bn – the company benefited from a 23 per cent fall in the amount it paid in tax during the period. The drop comes in the wake of tax reforms introduced by the US president and passed into law late last year.

Soon after the changes were signed into place, JP Morgan announced it was raising salaries for most of its retail bank staff and would open branches in a number of new markets.

JP Morgan’s pre-tax income rose by $2bn over the first three months of the year and the bank said it effectively paid $240m less in taxes compared to a year earlier.

The bank’s effective tax rate was 18.3 per cent in the quarter, compared with the 22.7 per cent it paid during the same period in 2017.

Before the new tax law, JP Morgan’s average tax rate was in the high 20 per cent range. JP Morgan’s investment bank also had a solid quarter, helped by much more volatile and active markets.