Are Banks in the U.S. Making a Comeback?

Equities Editors Desk |

NYSE:BACThe Federal Deposit Insurance Corp. (FDIC) announced that the banking industry grew profits by 21 percent to $34.5 billion in the second quarter with consumer lending increasing as well. Almost two-thirds of U.S. banks reported better earnings in Q2, though revenue only grew by $1.3 billion.

In addition, the earnings growth was also very top heavy, as the top 1.5 percent--those with assets of $10 billion or more--accounted for 77 percent of the profit. Top banks such as JP Morgan Chase (JPM)Bank of America (BAC), Wells Fargo (WFC) and Citigroup (C) reported solid earnings in Q2, due in large part to their consumer lending businesses such as mortgages and other private loans.

Though banks have expressed more interest in lending and have been loosening the credit markets, the question is whether consumers and businesses are willing to borrow. As major question marks affecting the economy continue to loom, consumers and businesses may once again feel the need to hold off on major purchases and investments.

Consumer confidence as measured by Conference Board’s index fell to 60.6 for August, marking the lowest level in nine months and a steep drop from the revised 65.4 for July. Some of the more prominent consumer concerns include the prospects for employment opportunities and income growth. Rising gas prices have also played a factor.

Unless conditions improve, consumers and businesses may be more reluctant to take on additional debt until they are more certain that they'll have the ability to pay it off.

 

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Companies

Symbol Name Price Change % Volume
BAC Bank of America Corporation 15.38 0.09 0.59 66,076,402
C Citigroup Inc. 46.87 0.50 1.08 15,871,608
GLV.B:CA GLV.B:CA n/a n/a n/a 0
JPM JP Morgan Chase 66.71 0.35 0.53 11,278,036
WFC Wells Fargo & Company 45.31 0.22 0.49 28,220,297

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