Bank of America, Citigroup and Wells Fargo all beat quarterly estimates as loan losses released

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US banking giants Bank of America (NYSE:BAC), Wells Fargo & Company (NYSE:WFC) and Citigroup Inc all posted better-than-expected earnings for the third quarter, continuing the strong start to US third-quarter results season.


Releasing Q3 numbers ahead of market open on Thursday, BoA said net income soared 58% to US$7.7bn, giving earnings per share (EPS) of 85 cents, well above market expectations of 71 cents.


Revenue was 12% higher at US$22.8bn, compared with forecasts for US$21.8bn. Net interest income rose by 10% to US$11.1bn, also above market expectations of US$10.6bn, driven in part by strong deposit growth.


Non-interest income was 14% higher at US$11.7bn, boosted by record asset management fees, strong investment banking revenue and higher sales and trading revenues.


Bank of America (NYSE:BAC) made a reserve release of US$1.1bn as a result of asset quality improvements during the quarter.


Like other banks, it had set aside billions of dollars last year in reserves to cover losses in anticipation of defaults related to the COVID-19 pandemic. Some of these reserves have now been released as the losses did not occur.


The wealth and investment management division saw record net income of US$1.2bn on record revenue of US$5.3bn, with client balances rising 20% to US$3.7trn, on the back of higher market valuations and US$91bn in client flows over the past 12 months.


This was a similar story to rival JPMorgan Chase, which kicked off US earnings season a day earlier, and saw profits boosted by strong deal-flow and a reserve release.


Wells Fargo, meanwhile, reported net income of US$5.1bn and EPS of US$1.17, compared to the US$0.98 pencilled in by analysts.


Net interest income was down 5%, due to lower loan balances that reflect soft demand, also higher prepayments and lower yields.


Wells included a US$1.7bn decrease in credit loss provisions, equivalent to $0.30 per share.


Citigroup’s net income climbed 48% to US$4.6bn, or EPS of US$2.15 per share, on revenue that fell 1% to US$17.2bn.


The Street’s forecasts has pointed to EPS of US$1.71 on revenue of US$16.98bn.


Citi released US$1.1bn of loan loss reserves.


BoA shares were 1.21% higher at US$44.35 in pre-market trade, while Wells was up 1.15% and Citi 1.45%.

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