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Three major U.S. banks reported Q2 earnings on Friday. See below for more details (all dollar amounts are in USD).

Wells Fargo

Wells Fargo says its profit edged higher in Q2 2017 as the bank got a boost from rising interest rates and the planned sale of its insurance service business.

The San Francisco-based bank said its profit grew 5% to $5.8 billion, or $1.07 per share. That was more than the $1.01 per share expected by analysts, according to FactSet.

The Federal Reserve has raised interest rates three times since December, which lets banks charge more money for lending, and Wells Fargo said its net interest income climbed 6 per cent to $12.5 billion.

Wells Fargo is the largest U.S. mortgage lender, and it said originations of mortgage loans dipped to $56 billion from $63 billion one year ago. But Wells Fargo made fewer auto loans because it tightened its lending criteria.

Wells Fargo reported $22.17 billion in revenue, down slightly from last year. Analysts surveyed expected $22.47 billion.

The bank said its checking account customers increased 0.7% — even though the bank is still dealing with the fallout from a sales practices scandal that became public in September.

Regulators fined Wells Fargo $185 million in September for opening more than 2 million accounts fraudulently as employees tried to meet aggressive sales goals. Afterward, CEO John Stumpf stepped down and the head of the consumer banking division, Carrie Tolstedt, moved up her retirement.

Both were ordered to forfeit stock awards, and the bank clawed back $75 million it paid to Stumpf and Tolstedt. Wells Fargo also scrapped its sales goals and announced new compensation standards.

On Saturday Wells Fargo received preliminary approval to pay out $142 million to customers affected by the scandal, but state and federal authorities are still investigating. Fed Chair Janet Yellen told Congress this week that the Fed needs to investigate to find the root causes of Wells Fargo’s problems and that the Fed is prepared to take action in response.

As of July 14, Wells Fargo stock is down slightly this year, while the Standard & Poor’s 500 index has risen almost 10%. Like other banks, Wells Fargo’s stock surged since Donald Trump was elected president in November as investors hoped for stronger economic growth and higher interest rates along with looser regulations.

JPMorgan Chase & Co. 

JPMorgan Chase & Co. said its Q2 profits rose by 13% from a year earlier, as the nation’s largest bank by assets benefited from rising interest rates and more fee income from investment banking.

JPMorgan said Friday that it earned a profit of $7.03 billion, or $1.82 per share, compared with $6.20 billion, or $1.55 a share, in the same period a year earlier. The results beat analysts’ expectations, who were looking for JPMorgan to earn $1.59 a share, according to FactSet.

“We continued to post very solid results against a stable-to-improving global economic backdrop,” said JPMorgan CEO Jamie Dimon in prepared remarks.

The nation’s biggest banks have benefited from the Federal Reserve’s decision to raise interest rates steadily this year, and JPMorgan is no exception. The bank reported an 8% rise in the money it collects on interest compared to a year ago, which benefited the bank’s consumer and commercial banking divisions. The bank has also been making more loans across all its businesses, up 4% from a year earlier, which in turn has helped interest income.

JPMorgan’s consumer banking division had a profit of $2.22 billion compared with $2.66 billion a year earlier. Last year’s results included a $200 million in one-time benefits. The bank also had to set aside more money this quarter to cover bad loans, mostly in its credit card division. JPMorgan executives have previously said the bank is starting to offer and approve applications for credit cards to higher risk borrowers that it previously would have rejected.

Despite the money set aside for bad loans, Dimon said: “the U.S. consumer remains healthy.”

JPMorgan’s investment and corporate banking division had a profit of $2.71 billion compared with $2.49 billion in the same period a year earlier. While the bank saw a 17% rise in investment banking fees, this quarter’s quiet stock and bond markets depressed the bank’s trading revenue by 17%. Fixed income trading revenue was down 19% from last year while stock trading was mostly flat.

Citigroup

Citigroup was Friday’s outlier since its Q2 profit fell 3%. The bank had to set aside more money to cover souring loans, especially in its credit card business. Like its competitors, it also saw a drop in trading revenue caused by quieter markets.

The New York-based bank earned $3.87 billion, or $1.28 per share, compared with $3.99 billion, or $1.24 per share, in the same period a year earlier.

But, the results still beat analysts’ forecasts of $1.21 a share, according to FactSet.

Like its rival JPMorgan Chase, Citigroup saw a sizeable increase in interest income. The Federal Reserve has been steadily raising interest rates, which has allowed banks to charge more to borrow. Citi had net interest revenue of $11.17 billion, up 6% from a year earlier.

At the same time, Citi had to write off more bad loans in the quarter, mostly in credit cards. Citigroup has been expanding its credit card business, similar to its rivals.

Citi’s global consumer banking division earned $1.13 billion, down 12% from a year earlier.

The bank’s investment and trading operations had a better quarter. Citi’s institutional clients group earned $2.76 billion, up 6% from a year earlier. While trading revenues were down across the board, Citi saw a jump in fee income from advising companies in its investment bank.

Originally published on Advisor.ca
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