First the good news. All three of the banks reporting this week (JPMorgan Chase, Bank of America and Citigroup) beat analysts’ expectations, for what that is worth. And all saw a clear improvement in their loan books, with non-performing loans and charge-offs (of loans viewed as no-hopers) both falling””at JPMorgan, for instance, by 3% and 28% respectively compared with the previous quarter. This has allowed the banks to release some of their loan-loss provisions, the reserves they set aside to cover soured credit.
This looks like more than just a flash in the pan. Citigroup’s net loan losses have now fallen for four straight quarters. That said on a conference call with journalists its chief financial officer, John Gerspach, was considerably more optimistic about emerging markets than America, where mortgage losses could remain stubbornly high. Brian Moynihan, BofA’s chief executive, said loan quality is improving faster than he had expected.
And the bad news? Demand for loans remains slack. Bankers are becoming “very worried” about asset growth in the medium to long term, says one consultant.
Worse, their securities and investment-banking businesses are no longer making money hand over fist, as they did in the first quarter and for much of last year…
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