WALL STREET PARTY!
US banks ring up record profits of $48.3B in Q2
Wall Street just had its most profitable quarter ever — fueled in part by the skimpy returns paid out on savings accounts.
US banks rang up record profits of $48.3 billion in the second quarter as the Federal Reserve’s interest rate hikes weren’t passed along to consumers, the FDIC said Tuesday.
The total bottom line profit marks a 10.7 percent rise from the same period last year — resulting in the biggest profit quarter in Wall Street history, an FDIC spokeswoman confirmed.
Banks have been clearing more profit as the Federal Reserve has hiked its benchmark rate four times since 2015.
The interest rate banks charge on loans is based on the Fed rate — meaning banks can charge a higher interest rate on loans after a Fed hike.
But banks are not raising the interest they pay on accounts — and they can pocket the difference.
JPMorgan Chase, the largest US bank, reported $26.5 billion in profit for the 12 months ended June 30. That’s the most profitable year for a company in the history of banking, according to Bloomberg.
Most other banks have seen their profits surge this year, as well as their stock price.
One glaring exception, Goldman Sachs, has seen its profits hit by bad bets on energy, according to reports.
Nevertheless, Goldman’s stock is still trading near alltime highs, thanks to optimism that the White House will pass a corporate tax reform bill.
Despite the ebullience at banks, not all is clear on the horizon, said FDIC Chairman Martin J. Gruenberg.
“While the quarterly results were largely positive, the op- erating environment for banks remains challenging,” Gruenberg said in a speech Tuesday, warning of risks to liquidity and the credit markets.
“These risks must be managed prudently for the indus- try to continue to grow on a long-run, sustainable path,” he added.
Bankers, however, seem more interested in keeping the spigot of money flowing. And that argument involves rolling back regulations.
JPMorgan boss Jamie Dimon has been the most vocal Wall Street executive when it comes to what he calls overregulation.
While Dimon said Washington shouldn’t toss all Dodd-Frank financial reforms, he’s called for them to “open the rule book” and let banks use more leverage.
Lloyd Blankfein, Goldman’s chief executive, has also said that the so-called Volcker Rule, which prevents banks from trading with their customers’ money, should be loosened.
Trump has promised that his administration would “dismantle Dodd-Frank,” although legislators haven’t put forth any serious bills that would repeal the landmark Obama-era law, which forced banks to rein in risky trading and hold more capital in case of a market crash.
Trump has installed more industry-friendly regulators and slowed hiring at agencies like the Securities and Exchange Commission, which was behind some of the biggest fines against banks during the last eight years.