The big Wall Street banks capitalized on a less severe impact of the pandemic than feared, and solid activities of their investment banks. If the end of the year was more nuanced, they announced a sharp increase in profits in 2021. JPMorgan Chase earned $ 48.3 billion over the whole 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 dollars. 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 (Fed) 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%.

Loans down

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 sums they lend. Low interest rates and the liquidity injected by the Fed, 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. Activities related to financial markets, which had been particularly volatile in 2020, for their part fell at the end of the year.

Watch inflation closely

For 2021 as a whole, JPMorgan’s revenue rose 1% to $121.65 billion, Citi’s fell 5% to $71.9 billion, and Wells Fargo’s rose 6% to $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 3% mid-session while Citi fell 2.6% and JPMorgan fell 5.8%.

This is partly a catch-up after a rally in the banking sector on Wall Street in recent weeks, fueled by anticipation of a Fed interest rate hike in 2022. Some points have also disappointed analysts, including the Stronger than expected decline in the brokerage of fixed-income financial products such as bonds, indicates Gregori Volokhine, portfolio manager at de Meeschaert Financial Services. JPMorgan Bank has also warned that it may not meet its target on a key element of profitability (return on tangible equity) in the short term due to several challenges, including a sharp increase in expenses. than expected because of 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 in a briefing with reporters, consumer demand remains high. Wells Fargo, for its part, has observed a slight slowdown in purchases in restaurants, travel and leisure since the appearance of the Omicron variant, its boss Charles Scharf said during a conference call. But overall spending was still “solid” in early January, he said.

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