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Bank earnings reflect brimming optimism

April 15, 2021

JPMorgan's Loan Loss Reserves chart

Source: JPMorgan

JPMorgan, Wells Fargo, and Goldman Sachs got earnings season off to a promising start yesterday, as all delivered bottom-line results well ahead of consensus expectations and struck optimistic tones for the quarters ahead. JPM, for example, noted that consumer spending has returned to pre-pandemic levels even as loan demand remains challenged. The bank indicated specifically that travel and entertainment spending was up 50 percent month-over-month in March in perhaps the most striking sign to date that pent-up demand is already beginning to fuel a boom in the most COVID-affected categories (it also said that last month was its best on record for auto originations). Most tellingly, charge-off were down by 28 percent year-over-year and the loan loss provision was slashed by a much greater than expected $5.2 billion.

WFC also released reserves in Q1 and also saw a drop in charge-offs and a pickup in spending while Goldman’s numbers were unsurprisingly bolstered by rising asset prices. All told, these are further signs that the conduits for the Fed’s extraordinary monetary stimulus are quite healthy – much more so than at the outset of the last expansion – and that the demand for loanable funds is rapidly improving as the economy is beginning to reopen. JPM CEO Jamie Dimon said today that the economy has the potential to sustain “extremely robust, multiyear growth”; the numbers that his firm and other released this morning are certainly pointing in that direction.

Daily Trivia

What service came to an end after nearly 170 years of usage when India shut down the world’s last remaining operation in 2013?

Previous Question

What building was depicted on early versions of the Discover card, a reference to the parent company that initially launched it?

Answer:

Sears Tower

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