JPMorgan Chase – Big Banks Rake in Record Profits as Stimulus Props Up Consumers
The U.S. government piled trillions of dollars of emergency funds into Americans’ accounts during the pandemic. That’s boosting the bottom lines of the banks that store their cash.
Lending giants reported blockbuster profits this week, in part because stimulus payments have helped consumers bounce back from the Covid-19 crisis and prevented more severe economic damage. The emergency funds helped boost deposits at the four biggest U.S. banks to $6.9 trillion last quarter, up 15% from a year earlier.
The resilience of consumers, thanks in part to those stimulus checks, also prompted the four lenders to reduce the amount they’d set aside for soured loans by $12.7 billion. Those reductions, known as reserve releases, came after the banks spent most of 2020 provisioning billions of dollars for credit losses with the expectation that Americans would be so economically devastated by the pandemic that they’d stop paying their credit-card bills and other loans in droves. That calamity never came to pass.
“This is the healthiest we have seen the consumer emerge from a crisis in recent history, driven in large part by the U.S. government stimulus package,” Citigroup’s new chief executive officer, Jane Fraser, told analysts on an earnings conference call.
At JPMorgan Chase & Co., deposits jumped 24% in the first quarter, and the bank posted a $5.2 billion reserve release. That reduction made its way to the bottom line at the largest U.S. lender, which reported its best first quarter on record, though CEO Jamie Dimon noted that he doesn’t consider the metric to be “core or recurring profits.”
At rival Bank of America Corp., deposits were up 19%, and the lender released $2.7 billion from its stockpile for souring loans — and Chief Financial Officer Paul Donofrio said reserves will probably decline further in coming quarters as the economy gets back on track and uncertainty eases.
Read more: Wall Street Keeps Smashing Records While Pandemic Lingers
Rescue funds have been critical to help some consumers get back on their feet after the pandemic put millions of people out of work and shuttered businesses across the country.