Several big banks kicked off earnings season by reporting EPS growth in the first quarter driven in large part by the release of reserves for credit losses amid signs of an improving economy.
All of the banks with at least $100 billion in assets that reported earnings from April 14 to April 16 posted year-over-year and quarter-over-quarter gains in EPS. The Big Four of the U.S. banking industry saw significant year-over-year increases in first-quarter earnings, with EPS exceeding analysts' expectations.
JPMorgan Chase & Co., the largest U.S. bank in terms of assets, saw EPS for the first quarter surge approximately 477% to $4.50 from 78 cents in the year-ago quarter. The jump was driven in part by credit reserve releases of $5.2 billion, which helped increase EPS by $1.28.
"Recent economic data has been consistently positive, indicating that the recovery may be accelerating faster than we would have thought just a few months ago," CFO Jennifer Piepszak said during JPMorgan's first-quarter earnings call.
Bank of America Corp., meanwhile, saw first-quarter earnings more than double to 86 cents per share, compared to 40 cents per share in the year-ago quarter.
BofA's provision for credit losses decreased $6.6 billion to a benefit of $1.9 billion, reflecting a reserve release of $2.7 billion amid an improved macroeconomic outlook and balance declines, according to the company's earnings release. Absent a deterioration in the environment, BofA expects reserves to decline further in the coming quarters as remaining uncertainties continue to improve, CFO Paul Donofrio said during the company's earnings call.
Citigroup Inc. said its increase in net income was driven by the company's institutional business and a release of $3.9 billion from allowance for credit losses as a result of the improving economic outlook. The company posted first-quarter earnings of $3.62 per share, up from $1.06 per share in the year-ago quarter.
Wells Fargo & Co. posted earnings per common share of $1.05, up from 1 cent in the year-ago period. Results for the latest quarter included a decrease of $1.6 billion in the allowance for credit losses due to continued improvements in the economic environment and lower net charge-offs.
Among other banks with more than $100 billion in assets, Citizens Financial Group Inc. also started 2021 on a strong note, reporting EPS of $1.37 for the first quarter, up from 3 cents in the year-ago period. The company reported a negative provision for credit losses of $140 million, which was primarily associated with the release of reserves reflecting strong credit performance across the consumer and commercial loan portfolios and improvement in the macroeconomic outlook.
"There's likely still more to go on reserve releasing, assuming the economic outlook continues to firm and clarify," Chairman and CEO Bruce Van Saun said during the company's earnings conference call.
PNC Financial Services Group Inc. and U.S. Bancorp were also among the big banks that reported more than 100% increase in EPS.
PNC Financial Services Group's earnings rose to $4.10 per share in the quarter ended March 31, from $1.95 in the same period a year ago. The company's financial results benefited from a $551 million provision recapture, driven by improvements in macroeconomic factors and lower loans outstanding.
U.S. Bancorp's EPS jumped to $1.45 per share in the first quarter from 72 cents in the year-ago period, with the company releasing over $1 billion in reserves for credit losses in light of improving economic outlook and credit trends.
Truist Financial Corp. saw first-quarter EPS increase more than 34% year over year to 98 cents. In its earnings release, the company said the growth in adjusted EPS resulted from a "record performance" in its insurance business, "record results" from investment banking and a significantly lower provision for credit losses. Truist Financial's provision for credit losses was $48 million for the first quarter, which includes a release of $190 million primarily reflecting lower loan balances and improved economic outlook.
San Francisco-based First Republic Bank, meanwhile, posted earnings of $1.79 per share in the first quarter, up more than 49% year over year.
During the quarter, First Republic Bank recorded a reversal of provision for credit losses of $14.6 million, which was primarily driven by a "substantially improved" economic outlook since year-end 2020 and the significant resumption of regular, consistent loan payments on COVID-19 loan modifications following the end of the modification period, according to the bank's earnings release.