July 12 - Big profit gains at JPMorgan and Wells Fargo suggest the US economy is improving. Fred Katayama reports.
Higher earnings at two of the top US banks show the economy is improving. JP Morgan and Wells Fargo boosted profits partly by setting aside less money for bad loans. JPMorgan's second quarter profit rose 31 percent to 6-point-5 billion dollars and crushed Wall Street's estimates. It was the fifth straight quarter in which earnings rose by double digits. Helping boost profit at America's largest bank: investment banking and trading income rose sharply and provision for credit losses fell 78 percent. And the huge losses stemming from the bad trade last year by the so-called "London Whale" is history. On the down side: its net interest margins fell as well. The bank said it would boost its dividend by 27 percent. CEO and chairman Jamie Dimon sounded cautiously optimistic about the future, saying, "Loan growth across the industry continues to be soft ... We continue to see broad-based signs that the U.S. economy is improving, and we are hopeful that, as jobs are added and confidence builds, the U.S. economy will strengthen over time." America's largest mortgage lender, Wells Fargo, also handily beat estimates with earnings that rose 20 percent to nearly $5.5 billion. And it grew its earnings per share for the 14th straight quarter. Macquarie Securities banking analyst Tom Alonso. SOUNDBITE: TOM ALONSO, BANKING ANALYST, MACQUARIE SECURITIES (ENGLISH) SAYING: "The shift from refi to purchase volume is probably a good sign, and it shows there is underlying strength, that what you're seeing is not just people taking down their monthly payment, that there is an underlying bid for housing in this market." Like JPMorgan, it expanded its bottom line partly by shrinking its allowances for credit losses by $500 million . And it says it hopes to further shrink that absent any turn for the worse in the economy.