Big banks are earning billions, and Trump’s tax cuts are a big reason
The five largest banks in the United States reaped tens of billions of dollars in profits in the first half of the year, thanks in part to a strong economy and to the lingering effects of President Donald Trump’s tax cuts.
Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase and Wells Fargo have all seen their tax rates decline to 22% or less as a result of the cuts, compared with rates of around 30% three years ago, one of the most consistent sources of strength apparent in quarterly earnings reports issued this week.
JPMorgan’s tax rate fell to just under 15% in this year’s second quarter, although the bank said it would probably inch higher later in the year. Wells Fargo’s tax rate for the quarter was just over 17%, and Bank of America’s was 18%.
The reduced rates helped offset a general decline in Wall Street trading revenue and added some pep to what would have otherwise been unremarkable quarterly performances by most of the banks.
Bank of America had the strongest results across the board among the five. It earned $7.3 billion from April through June, 8% more than it did during the same period last year. It also reported growth in deposits and loans to consumers.
“We see solid consumer activity across the board,” Bank of America’s chief executive, Brian Moynihan, said in a statement. He added that the country’s economy still appeared to be “steadily growing.”
JPMorgan’s overall results were strong, too: It earned
$9.7 billion for the quarter, 16% more than in last year’s second quarter. Its credit card business boomed, but revenue from other kinds of loans fell.
Activity on Wall Street has faltered recently, with investors unsure of how to plan for fallout from Trump’s continuing trade war and the increasing likelihood that the Federal Reserve will begin to cut interest rates after a brief period
of increases.
“We don’t know what kind of rate cut we’re going to get, and we don’t know why,” Paul Donofrio, Bank of America’s chief financial officer, said. “That’s important.”
Lower interest rates could cause banks to earn less in interest on loans. Bank of America and JPMorgan both warned that the Fed’s likely shift toward lowering rates meant that they would probably earn less in the second half of the year than they originally anticipated.