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Bank earnings give big bullish signal to investors, showing consumer is flush and spending

Published Sat, Oct 16 20219:43 AM EDT

Hugh Son @hugh_son

For some big U.S. banks, the pandemic has already effectively ended. That's what the results and commentary from the companies' third quarter earnings reports show . The six biggest U.S. banks by assets each posted profit and revenue that exceeded expectations this week, fueled by booming Wall Street deals and the release of funds previously set aside for Covid-related defaults. In particular, Bank of America CEO Brian Moynihan stated over and over again on Thursday that whether it was a return to loan growth, credit-card signups, or economic indicators like unemployment levels, the company was back in expansion mode. "The pre-pandemic, organic growth machine has kicked back in," Moynihan told analysts in a conference call. ``You see that this quarter and it's evident across all our lines of business." Given the industry's traditional role as bellwether for the U.S. economy, resurgent bank results are a positive sign for the broader market. Bank stocks surged this year after it turned out that extraordinary government support had prevented the worst possible outcomes feared at the beginning of the pandemic. The industry had set aside tens of billions of dollars for loan losses that never arrived, and the release of those reserves boosted profits this year. But because consumers and businesses were flush with cash, they didn't need to borrow on credit lines, resulting in weak loan growth for the industry. That dynamic shifted in the third quarter, however: Loan balances at Bank of America increased 9% on an annualized basis from t