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Illustration: Sarah Grillo/Axios

Some of America's biggest banks are making more money now than they were before the pandemic hit.

Why it matters: Quarterly earnings out this week hint that the worst economic scenarios haven't yet come to pass. Still, executives are warning there could be a rocky road ahead for the economy.

  • These banks are the biggest lenders in the country and have insight into the financial health of millions of Americans and businesses. So analysts often parse these quarterly results for indicators of how the economy is doing.

What they're saying: "The consumer is in reasonably good shape for whatever we may face next," Jennifer Piepszak, JPMorgan's chief financial officer, said during a call with Wall Street analysts this week.

  • "Having said that, there is a significant amount of uncertainty about what we may face next."

By the numbers: JPMorgan reported $9.4 billion in profits — 4% more than it made this time last year.

  • Goldman Sachs, which has way less exposure on the lending front, made $3.6 billion, nearly double what it made in the same quarter a year ago.
  • And while Wells Fargo and Citigroup saw a drop-off, they're both still profitable. Citi made $3.2 billion, while Wells Fargo raked in $1.7 billion.

What's going on: Banks were buoyed by strength in the Wall Street-facing divisions: including the parts of the company that, for instance, are focused on trading or help take companies public.

  • Also helping results: There haven't been widespread loan defaults, despite millions of Americans being out of work and scores of businesses operating at reduced capacity.
  • JPMorgan, for example, reported $1.2 billion in net charge-offs — or loans it doesn't expect payment on — which is less than it reported this time last year.

The state of play: Last quarter, the biggest banks set aside a whopping $24 billion to cover potential bad loans. This quarter banks added to those reserves, though at a slower pace — a sign that executives are still preparing for defaults down the line.

  • Bank of America released some of the money set it previously set aside for consumer loan losses, noting an improving economy.
  • The bank's CEO, Brian Moynihan, said on Wednesday Bank of America is seeing a return to "a generally sound underlying economy ... [b]ut we won’t get there until we have fully addressed the health care crisis and its associated effects."

Between the lines: The banks would have raked in even more money, were they not dealing with the aftermath of a slew of scandals.

  • Wells Fargo took a nearly $1 billion hit in expenses related to the fallout of its fake account scandal.
  • Citi had higher expenses thanks to a fine from a regulator in response to management failures.
  • JPMorgan also took a charge to help cover a $920 million fine for rigging commodity markets between 2008 and 2016.

The bottom line: Executives largely attribute the strength to stimulus measures — and they're calling for another package to help shore up consumers.

  • Another stimulus package "will create more buffer to take us through hopefully the other side of the tunnel, without too much pain and destruction to bank balance sheets," with loan defaults, Mark Doctoroff, global co-head of financial institution coverage at MUFG, tells Axios.

Go deeper

Dan Primack, author of Pro Rata
Jan 15, 2021 - Economy & Business

Trump blocks banks from limiting loans to gun and oil companies

Illustration: Sarah Grillo/Axios

Big banks are no longer allowed to reject business loan applicants because of the industry in which they operate, according to a new rule finalized on Thursday by the Trump administration.

Why it matters: Wall Street has curtailed its exposure to industries like guns, oil and private prisons, driven by both public and shareholder pressures. This new rule could reverse that trend.

Senate confirms retired Gen. Lloyd Austin as defense secretary

Photo: Greg Nash-Pool/Getty Images

The Senate voted 93-2 on Friday to confirm retired Gen. Lloyd Austin as secretary of defense. Sens. Mike Lee (R-Utah) and Josh Hawley (R-Mo.) were the sole "no" votes.

Why it matters: Austin is the first Black American to lead the Pentagon and President Biden's second Cabinet nominee to be confirmed.

House will transmit article of impeachment to Senate on Monday, Schumer says

Photo: Drew Angerer/Getty Images

Senate Majority Leader Chuck Schumer (D-N.Y.) announced that the House will deliver the article of impeachment against former President Trump for "incitement of insurrection" on Monday.

Why it matters: The Senate is required to begin the impeachment trial at 1 p.m. the day after the article is transmitted.