Citigroup and JP Morgan beat expectations after releasing loan reserves
American banks Citigroup and JP Morgan’s fourth quarter earnings beat analysts’ expectations helped by the release of a pile of cash set aside for loans.
Citigroup reported a seven per cent decline in the fourth quarter profit to $4.63bn, down from $5bn a year earlier. Earnings equated to $2.08 per share, higher than the analyst consensus of $1.34 per share.
“We ended a tumultuous year with a strong fourth quarter,” outgoing boss Michael Corbat said. “As a sign of the strength and durability of our diversified franchise, our revenues were flat to 2019, despite the massive economic impact of Covid-19.”
President-elect Joe Biden’s announcement of a $1.9 trillion stimulus package has been welcomed by Wall Street as a step towards economic recovery with hopes that banks will be able to recover.
Both banks have now announced the release of cash reserves they had built up for bad loans.
Citigroup has released $1.5bn from its loan loss reserves while JP Morgan released $2.9bn which helped to boost profits.
JP Morgan reported a better-than-expected 42 per cent jump in profit to $12.1bn up from $8.5bn a year earlier. Income excluding the loan reserves for the quarter came in at $9.9bn – $3.07 per share – considerably higher than Wall Street’s estimates of $2.62 per share.
“While we reported record profits of $12.1bn, we do not consider the reserve takedown of $2.9bn to represent core or recurring profits,” JP Morgan’s chief executive Jamie Dimon said.
“While positive vaccine and stimulus developments contributed to these reserve releases this quarter, our credit reserves of over $30bn continue to reflect near-term economic uncertainty and will allow us to withstand an economic environment far worse than the current base forecasts by most economists.”