The heads of two of America’s biggest banks remain optimistic that Donald Trump will successfully execute on his pro-growth agenda, as they delivered better-than-expected increases in profits, albeit marred by slower loan growth.
First-quarter profit increases of 17% at both JPMorgan Chase and Citigroup were largely driven by a strong performance at their respective trading businesses, buoyed by rising interest rates.
Higher rates, however, also weakened demand for mortgages. And a possible reluctance by companies to invest was demonstrated in slowing business credit growth, analysts said.
JPMorgan CEO Jamie Dimon told analysts on a conference call the bank wasn’t too concerned. “I wouldn’t overreact to the short term in our loan growth with so many things that affect it,” he said.
For one, he suggested companies may be considering other means of financing, such as issuing bonds. And a little bit of uncertainty is to be expected during the first year of any presidency, he added.
“You all should expect as a given that when you have a new president and they get going, the nine months after the first 100 days is going to be sausage-making period. There will be ups and downs, wins and losses,” Dimon said.
He added: “What you see is a pro-growth agenda—tax, infrastructure, regulatory reform—and that is good all things being equal. And we think that it should be helpful for Americans. To expect it to be smooth sailing, that would be silly.”
The president’s first days in office have been far from smooth, with the failure of his healthcare bill sparking concerns he won’t be able to find consensus among fellow Republicans for his tax-cut plans.
Citigroup’s Michael Corbat still thinks Trump will get a few runs on the board.
“While the details of potential policy changes in the areas such as tax code and infrastructure spending have yet to be worked out and will take longer than originally projected, we continue to believe that it’s a matter of when and not if these changes will occur,” he told analysts.
“As that process unfolds and becomes clearer, I expect business will react accordingly as sentiment shifts from optimism to confidence,” Corbat said.
In the meantime, pressure on loan growth from rising interest rates won’t help Wells Fargo CEO Tim Sloan, who has the unenviable task of growing the retail bank’s revenue while stamping out the scandalous and aggressive sales practices that toppled his predecessor.
Wells Fargo reported flat quarterly earnings that disappointed analysts.
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