Executives of big US banks expressed optimism on Friday about the outlook for 2017 in their first public comments about quarterly earnings since the US presidential election in November. J. P Morgan Chase & Co and Bank of America Corp , the two largest US banks, kicked off the corporate reporting season on a rosy note, each with healthy increases in fourth-quarter profit. Those improvements came on the back of trading revenue gains, higher interest rates, healthy loan growth and cost controls.
On the flip side, the earnings of Wells Fargo & Co, which also reported on Friday, were hurt by the fallout of a sales scandal and a loss related to accounting, both of which are particular to the San Francisco-based lender.
Results at regional lender PNC Financial Services Group Inc were better than expected, with Chief Financial Officer Rob Reilly predicting the bank will be able to increase revenue faster than expenses this year.
Shares of all four banks climbed Friday afternoon, with J. P Morgan up 0.5 percent at $86.64, Bank of America up 0.4 percent at $23.01, Wells Fargo up 1.1 percent at $55.15 and PNC up 0.4 percent at $118.39.
On conference calls with reporters and analysts, top executives were sanguine about topics ranging from interest rates and loan growth, to regulation and the incoming administration of President-Elect Donald Trump.
"We are very optimistic about the future, optimistic about new policies which could spur growth," Bank of America Chief Executive Brian Moynihan said.
The bank's finance chief, Paul Donofrio, predicted BofA will be able to produce an additional $600 million in the current quarter from higher interest rates, with further gains throughout the year.
He also cited customers' "high credit quality" and positive trends in auto, home and middle-market loans, as being supportive of earnings.
In the fourth quarter, BofA benefited from an aggressive cost-cutting program Moynihan detailed last summer, as well as a pickup in trading revenue.
J. P Morgan Chief Executive Jamie Dimon was slightly more circumspect, but said he was comforted by the fact that Trump was selecting people with experience to join his team.
Dimon also cited several positive economic trends that suggest the global economy is headed in the right direction, which will help buoy bank earnings.
"The economy is getting a little bit better," he said. "Interest rates help and looking forward, you probably have a better political, legal and regulatory environment."
The bank is sticking by its loan growth forecast of 10 to 15 percent for 2017, though Chief Financial Officer Marianne Lake said it might be toward the lower end of the range.
Despite Wells Fargo's unique troubles, its chief financial officer, John Shrewsberry, also said the bank had a "solid underlying performance," citing loan growth, good credit quality and higher interest rates.
The idea that banks will benefit from lighter regulation, rising interest rates and lower taxes under Trump has driven bank stocks up nearly 25 percent since the election. Nearly all the executives commented on the enthusiasm evident in markets, but were hesitant to fully endorse it.
For instance, Dimon noted that it may take a full year for the new government in Washington to decide exactly how it will tackle complex issues like corporate tax reform. And, he said, increased competition means lenders may just "compete away" any tax benefits they receive.
"We've all heard that the new administration in Washington supports tax reform, regulatory relief and other pro-growth policies," said PNC Chief Executive Bill Demchak. "But, so far, a move in interest rates is the only thing that has actually happened."
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