Without big Wall Street trading arms, regional banks lean on mortgages and fees to beat earnings

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Several smaller national and regional banks beat earnings expectations this week despite not having the large trading operations of their larger competitors.

Citizens CEO Bruce Van Saun said the combination of low mortgage rates, high margins and people looking to move during the summer created a "perfect storm" for the mortgage business. He said he expected the second quarter represented the peak of the mortgage business during this cycle but that it should remain an area of strength.

For US Bancorp, RBC Capital Markets and Morgan Stanley, citing revenue growth from fees, raised their earnings estimates for the bank following the earnings report. The impact of the pandemic downturn for banks can be most easily seen in the provision for credit losses. That measure has jumped over the last two quarters as banks prepare for loans to go bad during the economic downturn.booked a $2.5 billion provision for the quarter, resulting in negative earnings from operations for the quarter.

Van Saun, who described his view of the economic recovery as improvement in a "sawtooth pattern" that included fits and starts based on the health situation, said he felt confident the provisions were sufficient for his bank's business mix, which includes a much smaller reliance on credit cards than some of the larger players.

 

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