Three of America’s biggest banks – Bank of America, Wells Fargo, and Citigroup – pumped out quarterly profits that crushed analysts’ estimates Wednesday.
In a sign of the economic recovery, the banks were able to buoy their profits by releasing billions of dollars in loan loss reserves. They had previously set aside funds in case loans went sour, but those losses didn’t materialize.
Partly as a result, Bank of America’s profit nearly tripled to almost $9 billion, Citigroup’s jumped six-fold to $6.2 billion, and Wells Fargo, which is trying to turn around from a sales practices scandal, swung to a profit of $6 billion from a loss.
But rock bottom interest rates in the U.S. put in place to revive an economy hit by the health crisis hurt the lending businesses at all three banks.
On Tuesday, JPMorgan Chase and Goldman kicked off earnings season, reporting surging profits that topped estimates. Releasing loan reserves and a wave of dealmaking boosted their bottom lines.
As with those two banks, investors who were counting on blowout quarters weren’t impressed, sending shares of Bank of America, Wells and Citi lower in early trading Wednesday.