Wall Street banks prospered in 2021, with some clouds at the end of the year

On the stock market, the results were received in a mixed way. Wells Fargo climbed around 10:50 a.m. Quebec time by 4.6% while JPMorgan fell by 4.8% and Citi by 1.9%. (Photo: 123RF)

New York — Major Wall Street institutions posted sharply higher profits in 2021 thanks to a less severe impact from the pandemic and the solid activities of their investment banks, although some elements have darkened at the end of the year. ‘year.

JPMorgan Chase earned US$48.3 billion for the full year, a record. Citi saw its net profit double to 22 billion while that of Wells Fargo was multiplied by six, to 21.5 billion $US.

Performance was somewhat worse in the fourth quarter for JPMorgan Chase and Citi, however, with their net profit falling 14% and 26% respectively due to higher operating expenses.

These large banks have reduced throughout the year the sums set aside at the start of the pandemic to cover possible outstanding payments from individuals and businesses.

Bailed out by government aid and massive injections from the US central bank into the economy, their clients have in fact mostly maintained good financial health.

“The economy continues to do well despite challenges with the Omicron variant, inflation and supply chain bottlenecks,” JPMorgan boss Jamie Dimon said in a statement.

At his bank, spending by individuals on their debit and credit cards rose another 26% in the fourth quarter while their deposits grew by 20%. At Citi, spending volumes on credit cards also climbed 20%.

Their customers have also borrowed less, removing a source of income from the banks.

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In the fourth quarter, the total amount of loans granted to individuals and small businesses was still down 1% at JPMorgan while Citi customers continued to repay their debts more actively than usual.

Throughout the year, banks also faced low interest rates, which limit the money they can earn on the money they lend.

Interest rates and central bank liquidity, on the other hand, prompted many companies to undertake major maneuvers.

Bankers advising companies wishing to raise money or carry out mergers and acquisitions have been particularly active. In the fourth quarter, their commissions still jumped 43% at Citi, 37% at JPMorgan.

Inflation

Activities related to financial markets, which had been particularly volatile in 2020, for their part fell at the end of the year.

For 2021 as a whole, JPMorgan’s revenue increased 1% to US$121.65 billion, Citi’s fell 5% to US$71.9 billion, and Wells Fargo’s rose 6% to US$78.5 billion.

Wells Fargo, weighed down for several years by the scandal of the creation of fictitious accounts, also did well in the fourth quarter, with a turnover up 13% and a jump in its net profit of 86%.

On the stock market, the results were received in a mixed way.

Wells Fargo climbed around 10:50 a.m. Quebec time by 4.6% while JPMorgan fell by 4.8% and Citi by 1.9%.

This is partly a catch-up after a rally in the banking sector on Wall Street in recent weeks, fueled by anticipation of an interest rate hike by the US central bank in 2022.

Some points also disappointed analysts, including the sharper than expected decline in the brokerage of fixed-income financial products such as bonds, said Gregori Volokhine, portfolio manager at de Meeschaert Financial Services.

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JPMorgan bank has also warned that it may not be able to achieve its objective in the short term on a key element of profitability (return on tangible equity) due to several challenges, including a still moderate increase in interest rates. , loan growth of less than 10% and higher than expected spending growth due to inflationary pressures, particularly on wages.

For Citi Chief Financial Officer Mark Mason, inflation is an element to watch closely, “especially if it turns into a surge in wages or prices”. But for now, he added during a briefing with reporters, consumer demand remains high. “It is still too early to predict what will happen,” he said.



Reference-www.lesaffaires.com

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