Big U.S. banks surprise Wall Street with bigger-than-expected profits

America’s biggest banks surprised Wall Street Friday with quarterly profits that were bigger than anticipated in what was expected to be a rather dreary quarter.

JPMorgan Chase’s profit jumped 42% to $12 billion. Boosting its bottom line: the release of some of the credit reserves it had set aside for loan losses driven by the coronavirus pandemic. CEO Jamie Dimon said the positive developments on vaccines and fiscal stimulus allowed the bank to release some of its reserves.

Also lifting earnings: Investment banking revenue rose 37%, and the volatility in financial markets also helped bulk up its trading revenue. But the plunge in interest rates early in the year hurt the bank’s net interest margins. That’s the difference between what banks charge for loans and what they pay out to depositors.

Wells Fargo profit of nearly $3 billion also surprised analysts. The scandal-ridden lender was able to shrink its costs associated with bad loans, and that helped offset the hit from low interest rates.

Meanwhile, profit at Citigroup fell 7%. But the $4.6 billion earned was much larger than analysts had forecast. Like JPMorgan, releasing cash it had previously set aside for bad loans contributed to its bottom line.

But investors took profit on those banks’ shares in early trading amid a weak market open.

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