A rosy profit picture at some of the nation’s biggest banks shows how much they are insulated from the souring economy.
Nearly all major U.S. lenders reported earnings on Friday, and what they said was a boost in corporate lending showed companies are confident enough about their profit outlook that they are willing to borrow again, and even for longer periods of time.
Several of the banks, including Bank of America, reported an increase in net interest income from their lending activities, a key measure of how much they are earning on their assets. Bank of America, for example, reported an increase of 7 percent in its net interest income from the third quarter of 2018. The company has been focused on growing its commercial and industrial business, specifically buying up weaker lenders in the U.S. It has also streamlined its bank and recast many of its loan products to appeal to corporate clients.
Overall, Bank of America earned $5.4 billion in the third quarter, a 25 percent increase from the same period in 2018, according to a statement.
The bank’s bottom line wasn’t as strong as its second quarter earnings, when it earned $5.9 billion in the second quarter of 2018. Bank of America’s shares fell slightly after the news.
Corporate lending may reflect a healthier economy. In the third quarter, the consumer borrowing report showed that Americans reached deeper into their pockets, spending more money than they did in the same period in 2018. But whether banks have seen a more consistently optimistic consumer than the one the world watched collapse during the financial crisis in 2008, remains to be seen.
Markit, an economic data provider, also on Friday reported an increase in consumer confidence. Still, it was hardly high enough to allow companies to refinance debt with borrowed money.
For much of the quarter, the so-called doom and gloom had been predicting an economic crash, often put forth by investors, economists and even President Donald Trump. The stock market’s swoon earlier this year and the uncertainty that was driving it have allowed some businesses to borrow easily again, but only with debts that can be rolled over for a while.
“Credit conditions are benign and a lot of folks that do demand are getting it,” Markit Chief Economist Chris Williamson said in an interview on Friday. But that is not an economy where people can afford to invest heavily in new technologies or become highly productive.”