JPMorgan said in the earnings report this morning that its average loan balance increased 4% compared to the previous year in the second quarter. Commercial and industrial loans increased 3%. Its shares rose 0.4% in pre-market operations. PNC also reported an increase in loans. The results of Citigroup Inc. and Wells Fargo & Co. will expire at any time.
The recent run of slow loans has baffled investors for an otherwise strong period for the US economy. UU Now, the recovery could also catch unsuspecting investors, and in doing so, boost banking stocks, as our Market Bulletin noted this morning.
"We believe that investors' expectations for loan growth have dropped since the beginning of the year, so if loan growth is better than expected with second-quarter earnings, stocks could react positively. "said Brian Kleinhanzl, an badyst at Keefe, Bruyette & Woods Inc., in a note to clients.
The KBW The Nasdaq Bank index, which measures the performance of 24 banking shares, has fallen by 2.8% in the last three months. The S & P 500, on the other hand, has increased more than 5%. JPMorgan shares fell almost 6% during that period and Citigroup fell 5%. Goldman Sachs Group Inc. fell 12% and Morgan Stanley dropped 11%. Wells Fargo has resisted the trend, increasing by 6.3%.
Part of the fall in banking shares is due to the ever decreasing differential between short and long-term interest rates, which may reduce the amount of income that banks obtain from short-term loans and loans through longer periods.
To be sure, not all loans are improving. Real estate, once a thriving space for bank loans, has had growth rates that continue to fall. And the Office of the Comptroller of the Currency has warned about the flexibilization of commercial loan standards.
But the rebound of commercial and industrial loans is emerging as a bright spot that could change the narrative of banking actions.  You can subscribe to our markets newsletter by clicking here.