Major US banks post strong 2016 earnings

2 min

New York (AFP)

Two major US banks posted strong earnings last year, boosted by the recovering economy and booming financial market that followed the election of President-elect Donald Trump, the companies reported Friday.

And with expected economic stimulus and tax cuts likely to bring interest rate increases from the Federal Reserve, banks are expected to see continued profitability this year.

JPMorgan Chase announced record profits for 2016, boosted by a "dynamic" US economy and a surge in brokerage activities.

Annual net profit rose 1.2 percent to $27.7 billion, including $6.73 billion in the fourth quarter alone. This resulted in adjusted earnings per share of $6.19 for the year which was above analysts' expectations.

Bank of America said higher interest rates and an increase in consumer loans boosted earnings, but its business grew less than expected.

Net profit in 2016 jumped 13 percent year-on-year to $16.2 billion, marked by a 46.8 jump in the fourth quarter. This resulted in adjusted earnings per share of $1.50 for the year.

Bank of America, which had gained 35 percent on Wall Street since the November 8 election, fell 0.17 percent at 1225 GMT in pre-opening trading -- reflecting the disappointment of investors who expected the post-election euphoria to boost earnings further.

While revenues from consumer loans increased as expected following the interest rate hike by the Federal Reserve in December, revenues from market activities were not as strong as hoped.

"If the recent rate hike occurred too late to boost fourth quarter results, we anticipate a higher profit growth in the first quarter of 2017," chief financial officer Paul Donofrio said in a press release.

The Fed has suggested it could raise rates three times this year, given that the Trump administration promises deregulation of the financial sector, massive tax cuts and large investments in infrastructure.

Meanwhile, troubled Wells Fargo reported lower-than-expected 2016 results, hit by the scandal over thousands of fictitious accounts created without the knowledge of its clients. In the fallout the bank paid a fine of $185 million and the CEO resigned under pressure.

Net profit fell 4.2 percent to $21.94 billion last year, including a drop of 5.4 percent in the fourth quarter alone due to a series of costly measures the bank implemented to regain consumer confidence.

Earnings per share was $3.99 compared to the analysts' expectation of $4.03.