Bank of America and JPMorgan Chase both reported better-than-expected earnings on Friday, reflecting loan growth along with rising deposits and interest income.
Wells Fargo missed estimates but the bank showed signs of recovering from its sham-accounts scandal amid an overhaul of its retail banking operations.
“The robust tenor reflects a humming economy that produces jobs, raises consumer confidence, fuels the stock and housing markets and drives businesses to seek out more loans for expansion as President-elect Donald Trump prepares to take office,” USA Today said.
The S&P financial sector has jumped about 17% since the Nov. 8 election, far outpacing the S&P 500’s 6-percent rise.
Investors are betting that banks will “benefit from deregulation under President-elect Donald Trump’s coming administration and an environment that is expected to see rising interest rates,” MarketWatch reported.
For the fourth quarter, JPMorgan’s earnings rose 24% to $6.7 billion while revenue increased 2% to $24.3 billion. Bank of America’s fourth-quarter profit climbed 42% to $4.7 billion while revenue rose 2.1% to $20 billion.
“If you look at a broad range of things, it looks like growth may have gotten a bit better in the fourth quarter,” JPMorgan CEO Jamie Dimon said during an analyst call. “[The economy] looks like it’s stronger, not weaker.”
He added that “with some regulatory relief, you will see banks being more aggressive in growing, opening branches in new cities, adding to loan portfolios, seeking out clients they don’t have.”
Wells Fargo’s earnings fell 5.4% to $5.3 billion, and revenue remained flat, but key business metrics including loan growth, customer deposits, and interest income improved.
According to USA Today, consumer banking largely drove the banks’ growth, with mortgage production rising at Bank of America and JPMorgan, and credit card revenue and demand for mobile banking continuing to spike.
“J.P. Morgan had a terrific beat; BofA, a very nice one,” Wayne Kaufman, chief market analyst at Phoenix Financial Services, said. “You’d have to believe that the economy will be lackluster going forward to think that banks won’t do well from here.”