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Bank Profits Climb in Growing Economy but Lending Doesn’t Keep Pace

Category: Business,Finance

Loans at JPMorgan, the nation’s largest bank, had the fastest growth among the four. Its total loans grew by 4.4 percent, and JPMorgan said its “core” loans, or those made by the bank’s continuing operations, rose by 7 percent. In the second quarter, JPMorgan’s earnings per share soared 26 percent from a year earlier.

Wall Street analysts expected Citigroup, the country’s third largest bank, to report slightly more revenue than it actually did for the quarter. The difference was less than $100 million, but the miss still sent Citi’s shares lower on Friday. Citi’s loans grew by 4 percent from a year earlier, well below the 7 percent rise in the first quarter of this year. After adjusting for changes in currency exchange rates, Citi’s loans grew 5 percent in the second quarter compared with a year earlier, the bank noted in its earnings release. Loans to corporations grew by 8 percent in the second quarter.

Wells Fargo’s loans declined by 1.4 percent in the second quarter. Analysts did not expect strong growth at Wells Fargo after the Federal Reserve earlier this year required that the bank cap the growth of its balance sheet while it fixes the problems that led to a string of scandals.

But last month, Wells Fargo’s chief financial officer, John Shrewsberry, said the cap was not a significant factor. “It’s not a constraint on organic loan growth,” he said.

The Trump administration has contended that many of the regulations introduced after the financial crisis a decade ago to make banks stronger have held back lending and weighed on the wider economy. But annual loan growth for the banking sector as a whole was stronger in the last two years of the Obama administration, according to figures from the Fed.

The recent sluggishness in loan growth is not necessarily a bad thing. Some borrowers, especially large companies, have been able to borrow freely for years. And while some individuals find it hard to get mortgages, the post-crisis overhaul set up rules that prevented banks from making loans that borrowers would find hard to repay. That the economy is expanding without a huge surge in credit is one of the reasons the current recovery has lasted longer than past ones.

“There’s a lot of debt out there already,” said Sheila Bair, a former head of the Federal Deposit Insurance Corporation. “It’s not necessarily bad that loan growth is slowing. What you don’t want them to do is search for borrowers and do a lot of non-creditworthy loans.”

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