As U.S. lenders put aside billions to cover bad loans, those with armies of traders could cover the resulting losses. JPMorgan had the best of all worlds, and Wells Fargo had the worst, writes johnsfoley.
JPMorgan, Wells Fargo and Citigroup all reported losses in their core banking businesses on July 14, driven by big increases in the amount they set aside to cover bad debt.
JPMorgan reported $4.3 billion of earnings applicable to common shareholders for the second quarter, a 75% increase on first-quarter results, as a surge in trading and investment banking revenue offset $8.9 billion in provisions to cover bad lending. Fixed-income trading revenue doubled to $7.3 billion year-on-year, while equities increased 38% to $2.4 billion. Compared to the first quarter, those desks’ revenue increased 38% and 6%, respectively. Investment-banking fees, which include advising on deals and underwriting, rose 54% from the same period last year and 49% from the first quarter.
Wells Fargo reported a $2.4 billion loss as it added $8.4 billion to its allowance for credit losses. It also proposed cutting its dividend to 10 cents per share from 51 cents in the previous quarter. Chief Executive Charlie Scharf said he was “extremely disappointed.” Citigroup reported $1.1 billion of earnings applicable to common shareholders, a 52% drop from the first quarter and 76% lower the same period last year, as it earmarked $5.5 billion to cover future bad debt. Citi’s fixed-income trading revenue rose 68% from last year’s second quarter, and 17% from the first three months of this year, to $5.6 billion. Its equities revenue shrank 3% from last year’s second quarter, and 34% from this year’s first quarter, to $770 million.
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