Big Bank Earnings Are Less Than Meets the Eye
Strip out one-time gains and benefits from the tax cut, and profit growth in the third quarter was just 5 percent.
Take a closer look.
Photographer: Bloomberg
Bank earnings have mostly failed to impress investors this year. But it turns out the profits are even less impressive than they appear.
How much less? In all, the nation’s six largest banks reported an income increase of $6 billion in the third quarter. But 83 percent of that was earnings manufactured by either booking one-time gains, reversing prior losses or paying less in taxes thanks to this year’s corporate rate cut. Strip all that out and the big banks’ bottom line boost from improvements in their actual operations was $1 billion. That’s just 5 percent more than the same three months a year ago and far less than the 31 percent growth in earnings per share, which also includes a boost from buybacks, that the banks reported.