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What bank profits tell us about the economy


Wall Street is booming, at least in part. Merger madness and equity trading pushed up the results of major US banks in the third quarter. On Main Street, banks are still looking for greater loan growth, but many customers are spending more after resisting last year.

Here’s what America’s biggest banks are telling us about the state of the economy.

Expenses

Customer spending has eclipsed pre-pandemic levels, bank executives said, a trend they see continuing over the holidays. Spending on Citigroup C 0.77%

credit cards have jumped 20% over the past year to a record high. Late fees are on the rise and more and more people are starting to have balances. Executives said they were back to fighting over card customers.

“It’s a huge amount of spending going on,” Bank of America BAC said. 4.47%

General Manager Brian Moynihan, “and it’s picking up steam.”

Ready

A still fragile economy and widely open debt markets reduced demand for bank loans during the pandemic. At Wells Fargo WFC -1.61%

and Bank of America, total outstanding loans were down from a year ago, but up from the second quarter.

“We all dream of faster loan growth,” Mike Santomassimo, chief financial officer of Wells Fargo, said on a call with analysts.

One category of loans, securities lending, is growing rapidly. Bank of America and Morgan Stanley MS 2.48%

shows double-digit growth in loans to clients borrowing from their equity and bond portfolios.

Trade

Frenzied markets have boosted major U.S. banks during much of the coronavirus pandemic. Today, stock trading is still on the rise, but fixed income trading is slowing down. Morgan Stanley and Bank of America both saw gains in overall trading income. JPMorgan JPM 1.53%

Chase & Co., Citigroup and Wells Fargo reported lower trading revenues.

Investors have been trying to figure out the new “normal” level of trading. The third quarter could be proof that market revenues will remain higher than expected at major U.S. banks, in part because they are gaining more business from their international rivals, said Kush Goel, senior analyst at the investor Neuberger Berman.

Offers

A global business windfall continued to hit money for Wall Street banking. JPMorgan, Morgan Stanley, Bank of America and Citigroup all had record quarters for merger and acquisition costs. Goldman Sachs‘s

SG 1.27%

the league’s leading team is due to report on Friday. Executives said pipelines for potential future deals remain full. It’s a sign that business leaders have enough confidence in the economy to attempt transformative deals.

Wall Street Banks Quarterly Report

Write to David Benoit at david.benoit@wsj.com, Ben Eisen at ben.eisen@wsj.com and Orla McCaffrey at orla.mccaffrey@wsj.com

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