Loan growth stalls despite profit, trading gains at some U.S. banks

Thu Apr 13, 2017 8:15pm EDT
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By David Henry

NEW YORK (Reuters) - Big U.S. banks revealed more evidence of a slowdown in loan growth in their earnings reports on Thursday, though executives assured there is still healthy demand from borrowers and no reason to worry about the state of the economy.

JPMorgan Chase & Co (JPM.N: Quote) and Citigroup Inc (C.N: Quote) posted higher first-quarter earnings that beat analysts' expectations on large gains in trading revenue. Wells Fargo & Co (WFC.N: Quote), which relies more on traditional lending and less on markets-related businesses, reported a slight dip in profit due to a slowdown in mortgage banking.

The results underscored concerns expressed recently by analysts and investors that higher interest rates, combined with uncertainty about geopolitical events, could hurt economic growth - and therefore crimp lenders' bottom lines.

But on conference calls to discuss results, top bank executives dismissed those concerns, citing strong demand from borrowers with impressive credit quality.

"I wouldn't overreact to the short term in our loan growth with so many things that affect it," said JPMorgan Chief Executive Jamie Dimon.

The bank's core loan portfolio averaged $812 billion during the first quarter, up 9 percent on an annualized basis. But that growth rate has ticked down from 12 percent in the previous quarter and 17 percent a year ago. Wells Fargo's annual loan growth rate of 4 percent has also been slowing over the past year.

Citigroup's loan book has been skewed by divestitures and its acquisition of a credit-card portfolio. Adjusting for those matters, Citi's core loan book grew 5 percent in the first quarter, executives said. But management's outlook for loan growth has nonetheless been tempered.

"There was probably just some modest reduction in our expectation for loan growth ... compared to the earlier guidance, certainly following the first-quarter performance," Chief Financial Officer John Gerspach said.   Continued...

FILE PHOTO - People pass the JP Morgan Chase & Co. Corporate headquarters in the Manhattan borough of New York City, May 20, 2015.  REUTERS/Mike Segar/File Photo