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The Californian-based lender said earnings per share rebounded to 42 cents, just shy of a consensus forecast of 44c. Net income totaled $2.0 billion, compared to a loss of $2.4 billion in the second quarter. The improvement in the bottom line would have been even sharper had it not been for $961 million in customer remediation charges. The bank had already flagged these.
The main reason for that loss had been $9.5 billion in credit loss provisions, a line that shrank to only $769 million in the third quarter. The move is a reflection of how the bank expects its loan book to perform as the U.S. economy faces an extended period of weakness and uncertainty due to the Covid-19 pandemic.
“Strong mortgage banking fees, higher equity markets, and declining sequential charge-offs positively impacted our results, while historically low interest rates reduced our net interest income and our expenses continued to remain elevated,” chief executive Charlie Scharf said in a statement.
The bank’s mortgage activities have profited from a boom in housing as Covid-19 has triggered a flight from city centers to the suburbs, where lower prices allow for the extra space requirements of a family working from home.
JPMorgan (NYSE:JPM) and Citigroup (NYSE:C) had both posted sharp declines in provisioning in their results on Tuesday. The upbeat signal that that sent was, however, dampened by JPMorgan CEO Jamie Dimon later saying that it may still need to add $20 billion to its reserves if the economy falls into a double-dip recession.
Provisions of some $1.4 billion were also the main reason why Bank of America (NYSE:BAC)’s earnings missed expectations when they were announced earlier Wednesday. BofA and Wells Fargo both suffered from sharp drops in income from their main lending business as interest margins compressed in the wake of the Federal Reserve’s emergency rate cuts in the spring. Net interest income fell just under 20% from a year earlier at Wells Fargo, while Bank of America’s fell 17%.
JPMorgan had beaten expectations on Tuesday with third-quarter EPS of $2.92 on revenue of $29.94B, compared to forecast for EPS of $2.23 on revenue of $28.22B. The positive trend continued on Wednesday with both Goldman Sachs (NYSE:GS) and PNC Financial (NYSE:PNC) also reporting higher-than-expected earnings, Goldman in particular lifted by windfall earnings from its traders.
Wells Fargo stock, which has yet to make any meaningful bounce from its May lows, fell another 1.8% in premarket trading by 8:50 AM ET (1250 GMT).
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