Pandemic hasn’t hurt profits of big U. S. banks

Hundreds of thousands of small businesses are closing for good. Temporary layoffs at larger companies are becoming permanent. But the country’s largest banks, which together serve a majority of Americans through loans, credit cards or deposit services, are not raising an alarm.

In their third- quarter earnings reports this week, big banks have said they are prepared for a wave of loan defaults they expect in the second half of next year. And their own fortunes are just fine: A trading and investment banking bonanza on Wall Street is helping them stay profitable.

The pandemic has made for a turbulent year across a wide range of markets, but all the trading that investors have done in response has kept the revenue rolling into the banks.

Goldman Sachs reported strong markets revenue Tuesday, helping it generate profits of $ 3.62 billion — far surpassing analyst expectations of $ 2 billion. Trading of bond products linked to interest rates, corporate credit, mortgages, and the prices of oil and other commodities lifted the bond division’s quarterly revenue 49% higher from the same period last year. In stocks, divisional gains were 10%.

But it was not just Goldman that benefited. Bank of America’s investment banking business had the second- best performance in its history in the third quarter, trailing only this year’s second quarter, according to the bank’s chief financial officer. At JPMorgan Chase, trading revenue rose 21% and investment banking revenue 52% from a year earlier.

Steeling themselves for widespread defaults by customers unable to pay credit- card, home- loan or other debts because of the pandemic, the biggest banks have sent vast sums of cash into special pools they will draw from to cover losses in the future. But in general, the banks say, their customers are doing better than they expected.

The reason? Bank officials pointed to the trillions of dollars the federal government has distributed in the form of enhanced unemployment benefits, forgivable small- business loans and other programs created this spring by the CARES Act.

The bank with the most strained customers seems to be Wells Fargo, which said it had spent nearly $ 1 billion trying to help customers who were struggling to repay their loans come up with new payment plans to keep them from defaulting.