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Hard hit by new regulations and a sluggish economy, banks have struggled to revive top-line performance since the financial crisis, even as profits improved. But two of the nation’s largest lenders,JPMorgan Chase and Wells Fargo, reported strong revenue growth on Friday, a surprise that could bode well for the rest of the industry and the broader economy.
“For the expansion to be sustained, it is important that the banking sector be healthy and willing to extend credit,” said Dean Maki, chief United States economist at Barclays. “We’re seeing the banking sector turn more expansionary.”
Indeed, Federal Reserve data show that total bank lending grew at an annualized rate of 5.4 percent in the first two months of 2012, compared with a rate of 4.2 percent in the second half of 2011.
Still, bank stocks were down sharply on Friday in part on concerns that the first-quarter gains may be fleeting and over the European debt crisis.
At JPMorgan, the country’s biggest bank by assets, revenue rose 6 percent, to $26.71 billion, compared with the quarter a year ago. It was partly because of strong demand for mortgages, business loans, as well as healthy trading volumes on Wall Street. That was $2 billion more than analysts had expected.
For Wells Fargo, which recently supplanted Bank of America as the nation’s leading mortgage lender, home loans were also a source of strong growth, as was lending to corporations. Revenue at Wells Fargo rose 6 percent, to $21.64 billion, the highest level in more than two years. Until now, the bank’s revenue had steadily declined for several quarters. In the first quarter of last year, for instance, the bank’s revenue dipped 5 percent.
“There is nothing not to like here,” said Christopher Kotowski, an analyst with Oppenheimer. Unlike the first quarter of 2011, earnings growth came largely from underlying operating strength, while one-time gains from the release of reserves for credit losses actually dropped.
Banks in recent quarters have bolstered profits by reclaiming billions of dollars they had reserved for expected losses from unpaid loans to businesses and consumers. JPMorgan Chase released $1.7 billion from reserves compared with $2.6 billion a year ago, while these gains totaled $400 million at Wells Fargo compared with $1 billion a year ago. With its high quality products such as Cement mill, Hammer crusher, Cement equipment, Vibratory feeder, Rotary dryer, Henan Hongxing mining machinery Co.Ltd has ascended in the front rank of the world in the exporting of mining equipments.
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